Fruit you cannot Eat: Extension of the date of claiming capital gain exemption by CBDT
There are often the announcements and notification which though issued for the benefit of the taxpayers end up with zero value. The recent one is the first ever circular of 2023 (Circular No. 1/2023] which reads as under:
CBDT Extends Time Limit for Compliance to be Made for Claiming Capital Gain Exemption
The Central Board of Direct Taxes ( “CBDT” ) has issued a circular (1 of 2023)extending the time limit for compliance to be made for claiming any exemption under Section 54 to 54GB of the Income-tax Act,1961 in view of the then-Covid-19 pandemic. The CBDT had vide Circular No. 12 of2021 dated 25.06.2021 provided relaxation in respect of certain compliances to be made by taxpayers including inter alia investment, deposit, payment, acquisition, purchase, construction or such other action, by whatever name called. for the purpose of claiming any exemption under the provisions contained in Section 54 to 54GB orthe Income-tax Act. It was provided that the aforementioned compliances for which the last date of such compliance fell between 1st April 2021 to 29th September 2021, may be completed on or before 30th September 2021.
The CBDT circular issued on Friday states that In view of the representations received and on further consideration of the then prevailing COVID-19 pandemic and resultant restrictions imposed, causing genuine hardship faced by taxpayers in making the aforementioned compliances under the Act, the CBDT, in the exercise of its power under Section 119 of the Act, hereby provides that the aforesaid compliances for the purpose of claiming any exemption under the provisions contained in Section 54 to 54 OB of the Act, for which the last date of such compliance falls between 01 April 2021 to 28th February 2022, may be completed on or before 31st March 2023.
To have a complete understanding of the latest announcements by the CBDT, one may need to refer the Circular NO. 12/2021 as well which reads as under:
CBDT Circular 12/2021: Extension of Certain Timelines
CBDT extends certain timelines for Income Tax compliances to provide relief to taxpayers, vide Circular 12/2021 dt. 25/06/2021, in view of the severe pandemic COVID 19.
CBDT Income Tax Circular 12/2021 dt. 25/06/2021: Extension of time limits of certain compliances to provide relief to taxpayers in view of the severe pandemic
On consideration of genuine hardship being faced by the taxpayers in making various compliances under the Income-tax Act, 1961 (hereinafter referred to as “the Act”) in view of severe pandemic, the Central Board of Direct Taxes, in exercise of its power under Section 119 of the Act, provides relaxation in respect of the following compliances as under:
1) Objections to Dispute Resolution Panel (DRP) and Assessing Officer under section 144C of the Act, for which the last date of filing under that Section is 01/06/2021 or thereafter, may be filed within the time provided in that Section or by 31/08/2021, whichever is later;
2) The Statement of Deduction of Tax for the last quarter of the Financial Year 2020-21, required to be furnished on or before 31/05/2021 under Rule 31A of the Income-tax Rules, 1962 (hereinafter referred to as “the Rules”), as extended to 30/06/2021 vide Circular No. 9 of 2021, may be furnished on or before 15/07/2021;
3) The Certificate of Tax Deducted at Source in Form No.16, required to be furnished to the employee by 15/06/2021 under Rule 31 of the Rules, as extended to 15/07/2021 vide Circular No. 9 of 2021, may be furnished on or before 31/07/2021;
4) The Statement of Income paid or credited by an investment fund to its unit holder in Form No. 64D for the Previous Year 2020-21, required to be furnished on or before 151h June, 2021 under Rule 12CB of the Rules, as extended to 30th June, 2021 vide Circular No.9 of 2021, may be furnished on or before 15th July, 2021;
5) The Statement of Income paid or credited by an investment fund to its unit holder in Form No. 64C for the Previous Year 2020-21, required to be furnished on or before 30/06/2021 under Rule 12CB of the Rules, as extended to 15/07/2021 vide Circular No. 9 of 2021, may be furnished on or before 31/07/2021;
6) The application under Section 10(23C), 12AB, 35(1)(ii)/ (iia)/ (iii) and 80G of the Act in Form No. 10A/ Form No. 10AB, for registration/ provisional registration/ intimation/ approval/ provisional approval of Trusts/ Institutions/ Research Associations etc. required to be made on or before 30/06/2021, may be made on or before 31/08/2021;
7) The compliances to be made by the taxpayers such as investment, deposit, payment, acquisition, purchase, construction or such other action, by whatever name called, for the purpose of claiming any exemption under the provisions contained in Section 54 to 54GB of the Act, for which the last date of such compliance falls between 01/04/2021 to 29/09/2021 (both days inclusive), may be completed on or before 30/09/2021;
8) The Quarterly Statement in Form No. 15CC to be furnished by authorized dealer in respect of remittances made for the quarter ending on 30/06/2021, required to be furnished on or before 15/07/2021 under Rule 37BB of the Rules, may be furnished on or before 31/07/2021;
9) The Equalization Levy Statement in Form No. 1 for the Financial Year 2020-21, which is required to be filed on or before 30/06/2021, may be furnished on or before 31/07/2021;
10) The Annual Statement required to be furnished under sub-section (5) of section 9A of the Act by the eligible investment fund in Form No. 3CEK for the Financial Year 2020-21, which is required to be filed on or before 29/06/2021, may be furnished on or before 31/07/2021;
11) Uploading of the declarations received from recipients in Form No. 15G/15H during the quarter ending on 30th June, 2021, which is required to be uploaded on or before 15/07/2021, may be uploaded by 31/08/2021;
12) Exercising of option under sub-section (1) of Section 245M of the Act in Form No. 34BB which is required to be exercised on or before 27/06/2021 may be exercised on or before 31/07/2021.
With above contents, one may note that the CBDT vide its Circular No. 12/2021 dated 25.06.2021 has provided concession from capital gain tax by relaxing the period of investment, deposit, acquisition, purchase, construction etc under section 54 to 54GB. By point No. 7 of the said Circular, the period of investment for capital gain exemption was extended to 30th September 2021 if the last date of investment/construction/etc was in between 1st April, 2021 to 29th September 2021 (both days inclusive). CBDT has issued the first circular of 2023 for the benefit of various categories of taxpayers who were otherwise covered by Point No. 7 of the Circular No. 12/2021. The period of investment which was earlier extended to 30th September 2021 is now further extended to 31st March 2023.
As a result of Circular No. 1/2023 read with Circular No. 12/2021, the period of purchase/ construction/investment etc which was expiring in between 1st April 2021 to 28th February 2022 is now stretched to 31st March 2023. In short, the person can invest the amount for purchase/construction, etc till 31st March 2023 and can enjoy the capital gain exemption.
Let us first compare Present Circular (No. 1/2023) Vis a vis Earlier Circular (No. 12/2021):
- CBDT Circular No. 1/2023 & 12/2021:
This period of 6 months, 2 years or 3 years, if it was in between 1stApril 2021 to 28th February 2022, then the taxpayers will now be able to get the benefit if they make the investment till 31st March 2023.
- Present Circular (No. 1/2023) Vs. Earlier Circular (No. 12/2021):
Earlier, the relaxation was given for certain compliances which were falling in between 1stApril 2021 to 29th September 2021. Now, the relaxation period is stretched & covering the period from 1st April 2021 to 28th February 2022. Earlier, investment was required to be done till 30th September 2021 & now the same has been extended to 31st March 2023.
However, the present circular is a mere eyewash. It is like a fruit which can be seen but no one can eat it. The following one may note on this aspects:
- The due date of filing income tax return for the FY 2021-22 (AY 2022-23) was 31stJuly for generalized categories of taxpayers or 30th October for a few select categories of the taxpayers in business /covered by audit provision.
- The taxpayers must have already filed the return for the FY 2021-22 & those taxpayers who have failed to utilize the opportunity of investment/ exemption till 30thSeptember 2021, for any reason, must have paid the tax by filing the income tax return within original due date or within the due date of filing belated income tax return.
- In short, the due date for the FY 2021-22 is already over and the taxpayers are not allowed to file even the belated or revised income tax return. The last deadline to file the belated or revised return for the FY 2021-22 was 31stDecember 2022 whereas the present circular No. 1/2023 is issued 6th January 2023.
- Though there is a new concept of filing “Updated Return” for the FY 2021-22 till 31stMarch 2025, however it is of no use for the taxpayers in the present case. Updated return can be filed only if it is beneficial to the income tax department & is not allowed to be used to claim benefits or concessions. It cannot be filed if (a) it has the effect of decreasing the total tax liability determined on the basis of return furnished earlier or (b) if it results in refund or (c) increases the refund due.
- Though the CBDT intends to remove the hardship & offer the benefit to the genuine taxpayers, the timing of the circular doesn’t permit it. The circular won’t be of any use to the genuine taxpayers who have already filed the return & paid the tax.
Non-compliant could only be beneficiary of the present extension:
Only beneficiaries from the present circular could be those taxpayers who have not filed their income tax returns or who have not correctly incorporated the capital gain income in the ITR filed. In either case, they were not deserving & honest taxpayers.
What’s gone wrong with the present Extension Circular:
The present circular at least should have been issued before 31st December 2022 which was the deadline for filing the belated and revised return.
The issuance of circular on 06th January 2023 is of no use as the taxpayer cannot take the benefit of the beneficial circular.
How CBDT can ensures that the benefits goes to the Taxpayers:
- The circular intends to remove the hardship & offer the benefit to the genuine taxpayers.
- CBDT may issue another circular under section 119 to extend the period of filing Belated return U/s 139(4) & Revised Return U/s 139(5) for such categories of taxpayers who wish to claim the benefit of exemption as a result of present circular No. 1/2023.
- With this small circular, the benefit of the date extension of capital gain exemption can be extended to all the categories of the taxpayers.
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