The government has proposed as many as 39 amendments to Finance Bill 2022, clarifying the legislative proposals regarding tax laws, which will be taken up when the Bill is moved for passage in the House.
The proposed amendments include clarifications to proposals including those on disallowance of cess and surcharge as deductions and on virtual digital assets. Mint has seen a copy of the amendment proposals which have been circulated among MPs and are expected to be considered along with the Finance Bill for passage.
Lok Sabha schedule showed that business that could not be taken up on Thursday will be considered on Friday. The Lok Sabha on Thursday passed the Appropriation Bill, 2022 authorizing government spending for the financial year starting April.
Experts said that a clarification on disallowance of cess and surcharge as a deduction is a welcome move and will help in reducing litigation. In the Finance Bill, the government had sought to correct what it regarded as an anomaly arising from some court rulings over the years which allowed tax payers to claim cess payments as an expenditure. This correction was done with retrospective effect, which caused concern among businesses as the proposal entailed a penalty of 50% of the amount of tax saved by claiming deduction of cess.
“If a taxpayer, based on revised computation, pays the tax and interest due, then there will not be any penalty. This is a welcome clarification as the earlier proposal would have otherwise gone into litigation. The change removes this uncertainty and clarifies that there is no penalty if the tax payer makes good the tax payment,” explained Sudhir Kapadia, National Tax Leader, EY.
Sandeep Jhunjhunwala, partner at Nangia Andersen LLP, a consultancy, explained that Finance Bill 2022 had proposed a retrospective disallowance of deduction for surcharge or cess with effect from assessment year 2005-06.
The amendment provides an opportunity to taxpayers to seek non-levy of any penalty by making a claim to the assessing officer requesting for recomputation of total income without allowing surcharge or cess as an expenditure, said Jhunjhunwala.
Also, the Finance Bill provision on virtual digital assets had used the phrase “transfer.” The amendment now seeks to clear the ambiguity around this term to clarify that it applies to virtual digital assets irrespective of whether they are construed as capital assets or not.
The government proposes to disallow set off of losses from transactions in virtual digital assets while computing taxable income.
“The government continues to take a very conservative stance on taxation of crypto assets. This will further disincentivise investments and trading in crypto assets,” said Gouri Puri, Partner, Shardul Amarchand Mangaldas & Co., a law firm.
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