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CBDT Issues Explanatory Notes to Provisions of Finance Act, 2022

cbdt-issues-explanatory-notes-to-provisions-of-finance-act-2022

CBDT has released the Explanatory Notes to the Provisions of the Finance Act, 2022 vide Circular No. 23/2022 dated 03.11.2022. These explanatory notes describe the substance of the provisions/amendments made by the Finance Act, 2022. The 94-page circular contains Explanatory notes to the provisions of the Finance Act, 2022 and is spread through 48 paras, issued after a lapse of around 7 months since the enactment of the Finance Act, 2022 on 31.03.2022. Further, after a gap of 3 (three) years, the Board has come up with explanatory notes since 2019. The last time the Board published such explanatory notes was for the Finance Act, 2018.


Every year after the enactment of the Finance Act, CBDT publishes an explanatory circular to explain the changes introduced in the Income-tax Act, 1961 (‘Act’) through the Finance Act with the aim to seek harmonious and contextual interpretation of the provisions of the Finance Act and to bring clarity.



Following the usual practice, now, the Board has published the explanatory circular to explain the provisions of the Finance Act, 2022.  It also explains the provisions which were introduced by the Finance Act, 2022 but were not part of the Finance Bill, 2022 and thus were not discussed in the Memorandum explaining the Finance Bill, 2022. There were around 39 amendments to the Finance Bill, 2022 introduced by the government (known as government amendments) and all these find a place in this explanatory circular of 2022.


This explanatory circular of 2022 contains an extensive explanation of section-by-section amendments and the introduction of new provisions in the Income-tax Act/Rules that are generally relevant for Assessment Year 2023-24.


Furthermore, the circular has detailed the income tax rates for AY 2023-24 as well as the rates at which tax must be deducted at source (rates of TDS) and advance tax must be paid for the previous year 2022-23. Though the majority of these find a place in the ‘Memorandum Explaining the Provisions in the Finance Bill 2022′, however, these Explanatory Notes address the subsequent changes in the tax proposals. A conjoint reading of the Memorandum explaining the Finance Bill and the CBDT Circular on explanatory notes to provisions of the Finance Act are important aid of interpretation. However, one should note that this is only a Circular and not law or rule under the Act but it has a quasi legal status.


In this circular, various amendments to the Income-tax Act are discussed amply demonstrating as to which amendments are clarificatory/retrospective in operation and which amendments are prospective.


This circular or publication has a summary of all of the amendments to the Income-tax Act or Rules that the Finance Act of 2022 made, along with explanations from the CBDT, on the following issues:


Section of Income-tax Act, 1961

Particulars

2

Definitions

10

Incomes not included in total income

11

Income from property held for charitable or religious purposes.

12A

Conditions for applicability of sections 11 and 12

12AB

Procedure for fresh registration

13

Section 11 not to apply in certain cases

14A

Expenditure incurred in relation to income not includible in total income

17

“Salary”, “perquisite” and “profits in lieu of salary” defined

35

Expenditure on scientific research

37

General

40

Amounts not deductible

43B

Certain deductions to be only on actual payment

50

Special provision for cost of acquisition in case of depreciable asset

56

Income from other sources

68

Cash credits

79

Carry forward and set off of losses in case of certain companies

79A

No set off of losses consequent to search, requisition and survey

80CCD

Deduction in respect of contribution to pension scheme of Central Government

80DD

Deduction in respect of maintenance including medical treatment of a dependent who is a person with disability

80-IAC

Special provision in respect of specified business

80LA

Deductions in respect of certain incomes of OBUs/ IFSCs

92CA

Reference to TPO

94

Avoidance of tax by certain transactions in securities

115BAB

Tax on income of new manufacturing domestic companies

115BBD

Tax on certain dividends received from foreign companies

115BBH

Tax on Income from VDA

115BBI

Specified income of certain institutions

115JC

Special provisions for payment of tax by certain persons other than a company

115JF

Interpretation in this Chapter (Chapter XII-BA)

115TE

Tax on accreted income

115TD

Interest payable for non-payment of tax by trust or institution

115TF

When trust or institution is deemed to be assessee in default

119

Instructions to subordinate authorities

132

Search and seizure

132B

Application of seized or requisitioned assets

133A

Power of survey

139

Income Tax Return (ITR)

140B

Tax on updated ITR

143

Assessment

144

Best Judgment Assessment

144B

Faceless Assessment

144C

Reference to DRP

148

Issue of notice where income has escaped assessment

148A

Conducting inquiry, providing opportunity before issue of notice u/s 148

148B

Prior approval for assessment, reassessment or recomputation in certain cases.

149

Time limit for notice

153

Time limit for completion of assessment/ reassessment/ recomputation

153B

Time limit for completion of assessment u/s 153A

155

Other amendments

156A

Modification and revision of notice in certain cases.

158AA

Procedure when an identical question of law is pending before Supreme Court in an appeal by revenue

158AB

Procedure where an identical question of law is pending before High Courts or Supreme Court

170

Succession to business otherwise than on death

170A

Effect of order of Tribunal or Court in respect of Business Reorganisation

179

Liability of directors of private company

194-IA

Payment on transfer of certain immovable property other than agricultural land

194-IB

Payment of rent by certain individuals or HUF

194R

Deduction of tax on benefit or perquisite in respect of business or a profession

194S

Payment on transfer of VDA

201

Consequences of failure to deduct or pay tax

206AB

Special provision for TDS for non-filers of ITR

206C

Profits and gains from the business of trading in alcoholic liquor, forest produce, scrap, etc.

206CCA

Special provision for TCS for non-filers of ITR

234A

Interest for defaults in furnishing ITR

234B

Interest for defaults in advance tax payments

239A

Refund for denying liability to deduct tax in certain cases

245MA

DRC

246A

Appealable orders before CIT (Appeals)

248

Appeal by a person denying liability to deduct tax in certain cases

253

Appeals to the ITAT

255

Procedure of ITAT

263

Revision of orders prejudicial to revenue

271AAB

Penalty where search has been initiated

271AAC

Penalty in respect of certain income

271AAD

Penalty for false entry, etc., in books of account

271AAE

Benefits to related persons

271C

Penalty for TDS failure

272A

Penalty for failure to answer questions, sign statements, furnish information, returns or statements, allow inspections, etc.

276AB

Failure to comply with the provisions of sections 269UC, 269UE and 269UL

276B

Failure to pay tax to the credit of Central Government under Chapter XII-D or XVII-B

276CC

Failure to furnish ITR

278A

Punishment for second and subsequent offences

278AA

Punishment not to be imposed in certain cases

285B

Submission of statements by producers of cinematograph films or persons engaged in specified activity


As stated above, the Explanatory Notes to the Provisions of Finance Act, 2022 contained in this circular also finds place in the Memorandum explaining the Finance Bill, 2022 for those amendments which were in the Finance Bill, 2022 but do not contain explanatory notes for government amendments.


Hence, in order to avoid repetition, explanatory notes of certain important government amendments are discussed here.


Readers may refer to the full list of government amendments to the Finance Bill, 2022 here and their explanations here.


Definition of “books of account”


Para 4 of the Explanatory Circular of 2022 explains the amendment introduced by the government in section 2(12A) of the Income-tax Act, 1961 through the Finance Bill, 2022 which is related to the definition of “books of account” and is reproduced below-


4.1 Section 2 of the Act defines various terms used in the Act. Clause (12A) of section 2 defines “books or books of account” to include ledgers, day-books, cash books, account books and other books, whether kept in the written form or as print-outs of data stored in a floppy, disc, tape or any other form of electro-magnetic data storage device.


4.2 With the advancement of technology and its widespread utility in daily conduct of business, books of account are maintained in electronic form by a significant section of the assessees in the current age.


4.3 Therefore, to align the definitions under the Act with the current practices, clause (12A) of section 2 of the Act has been amended so as to provide that the definition of books or books of account would include books or books of account kept in electronic or in digital form or as print outs of data stored in such electronic or in digital form. 


4.4 Applicability: This amendment is effective from 1st April, 2022.


Corrigendum


CBDT issues Corrigendum to Circular No. 23 of 2022 Dated 03.11.2022 - Explanatory Notes to Finance Act, 2022 vide Circular No. 2/2023 dated 06.02.2023 to rectify the sub-point (iii) of point (1) of sub-paragraph (A) of paragraph 28.5. The circular reads-


In the said circular, in sub-point (iii) of the point (1) of sub-paragraph (A) of paragraph 28.5, the words "two assessment years preceding such assessment year" shall be read as "any assessment year preceding such assessment year"




More details will be published at a later stage.


Read the full text of CBDT Circular 23/2022 dated 03.11.2022 on Explanatory Notes to Provisions of Finance Act, 2022


CIRCULAR

 

INCOME-TAX ACT 


Finance Act, 2022-Explanatory Notes to the Provisions of the Finance Act, 2022 


CIRCULAR NO. - 23/2022, DATED 3rd NOVEMBER, 2022 


AMENDMENTS AT A GLANCE

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Download CBDT Circular 23/2022 dated 03.11.2022 on Explanatory Notes to Provisions of Finance Act, 2022 in PDF format

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