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June 29 To July 5, 2019 u Taxmann’s Corporate Professionals Today u Vol. 45 u 9the sub-chapter of Profits and Gains from
Business and Profession to enforce ICDS-VI
by stating that any gain or loss arising on
account of any change in foreign exchange
rates shall be treated as income or loss.
Similarly, clause (xviii) of Section 36(1) was
inserted to provide that any marked-to-market
loss or other expected loss as computed in
accordance with the ICDS shall be allowed
as deduction.
Though the Finance Act, 2018 brought suitable
amendments to the Act to give effect to some
ICDSs, yet there are a few ICDSs which have
not been supported by enabling provisions
like, ICDS-V (Tangible fixed assets).
Section 43(1) of the Income-tax Act deals
with the determination of actual cost. There
are various Explanations to Section 43(1)
which specify as to how actual cost has to
be worked out in various situations. ICDS-V
provides guidance for determination of actual
cost of an asset with reference to the way in
which it has been acquired. Thus, there must
be an enabling provision in the Income-tax
Act, 1961, so as to determine the actual cost
in manner provided in ICDS-V.
Thus, it is recommended that the forthcoming
Union Budget, 2019 should bring suitable
amendments to the Income-tax Act, 1961 to
include remaining ICDS requirements within
the Act so as to end the possible litigations.
- Provisions linked with Ind AS 115
Real Estate sector has been affected adversely
after introduction of Ind AS 115 (Revenue
from Contracts with Customers). Prior to
Ind AS 115, real estate companies were
recognizing revenue in accordance with the
Guidance Note on ‘Accounting for Real
Estate Transactions’ using the Percentage of
Completion Method (PoCM). This method was
applicable without any reference to transfer
of control of the asset.
Now under Ind AS 115, real estate companies
are required to record revenue only after
transfer of control of the asset to customers.
So, on transition to Ind AS 115 w.e.f. April
1, 2018, revenue earlier recognised as per
PoCM in respect of projects which are
still under-construction shall be reversed
and adjusted with the opening balance of
retained earnings. From Financial Year 2018-
19 onwards, revenue from such projects shall
be recognised as and when the control of
the assets is transferred. Such treatment may
lead to double taxation, one at the time when
revenue shall be recognised on PoCM basis
in earlier years and another time when the
same revenue shall be recognised under Ind
AS 115. If a real estate company is liable
to pay tax under MAT and it has already
paid tax on revenue recognized as per the
guidance note on PoCM method, it would
be liable to pay tax again on the revenue
recognized in the year in which control of
asset is transferred to the customers. Currently,
there is no provision under the Income-tax
Act, 1961 that deals with such a situation. So,
it is advisable that appropriate amendment
should be made in this budget to avoid this
situation of double taxation.- Computation of total Income for
filing of ITR
As per section 139, filing of Income-tax return
is mandatory for an individual if his income,
before allowing deductions under chapter
VI-A, Sections 10A, 10B and 10BA, exceeds
the maximum exemption limit.
If an individual claims exemption or deduction
under other sections of the Income-tax Act,
then same shall be reduced while computing
his total income for the purpose of determining
his obligation to file the Income-tax return.
For instance, if an individual earns only long-
term capital gains of ` 50 lakh on sale of
residential house and he invests in another
residential house and claims exemption under
section 54. In this case, he is not required
to file ITR as his total income shall be nil.
EXPECTATIONS FROM AND RECOMMENDATIONS FOR UNION BUDGET 2019