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Direct Tax

CBDT amends Rule 2B to provide exemption for cash allowance in lieu of LTC
vide Notification No. 50/2021 dated 05-05-2021

Where an employee receives Leave Travel Concession (LTC) from its employer for going on vacation in India, the amount so received shall be exempt from tax under Section 10(5), subject to certain conditions. However, due to the COVID-19 pandemic and the nationwide lockdown, employees had not been able to avail of Leave Travel Concession (LTC) in the current block of 2018-21.

Thus, to provide relief to such employees, the Finance Act, 2021 amended Section 10(5) to provide an exemption in respect of cash allowance received in lieu of LTC. The CBDT was empowered to prescribe the conditions subject to which such exemption can be claimed.
In exercise of such power, the CBDT has amended Rule 2B to provide that where the
employee avails any cash allowance from his employer in lieu of any travel concession or assistance for the assessment year beginning on 01-04-2021, he shall be eligible to claim an exemption for an amount equals to lower of the following:
i. Rs. 36,000 per person for the individual and the member of his family; or
ii. 1/3rd of expenditure incurred by an individual or a member of his family.
However, the exemption can be claimed subject to fulfillment of the following
conditions:

a) Such employee or his family members has incurred expenditure during the period
commencing from 12-10-2020 and ending on 31-03-2021 on goods or services,
which are liable to GST at an aggregate rate of 12% or above, and goods are
purchased, or services are procured from GST registered vendors or service
providers;

b) Such Employee exercises an option to claim an exemption for the deemed LTC fare
in lieu of the applicable LTC in respect of one unutilized journey during the block
of four calendar years commencing from the calendar year 2018;

c) The payment in respect of such expenditure is made by him or any member of his
family to a registered person during the period commencing from 12-10-2020 and
ending on 31-03-2021;

d) The payment in respect of such expenditure is made by an account payee cheque
drawn on a bank or account payee bank draft, or use of electronic clearing system
through a bank account or other electronic mode specified under rule 6ABBA; and

e) The individual obtains a tax invoice in respect of such expenditure from the
registered person referred.

NOTIFICATION NO59/2021/ F. NO. 225/58/2021-ITA. -II, DATED 10-05-2021

The CBDT vide Notification No.56/2021, dated 07-05-2021 has given relaxation to
Hospitals from provisions to section 269ST. Non-application of said section to specified
persons or class of persons providing COVID treatment to patients on receipt of payment in cash during 1-4-2021 to 31-5-2021 on obtaining PAN or AADHAAR. Now, the CBDT has issued corrigendum to correct the word "payee" with "payer" in the context of furnishing PAN or AADHAAR and the relationship with the patient.

Section 269ST restricts a person from receiving an amount of Rs. 2 lakh or more
otherwise than by an account payee cheque or account payee bank draft or use of
electronic clearing system through a bank account or other prescribed electronic modes.

Any contravention of this provision attracts penalty under Section 271DA.

The CBDT vide Notification No. 56/2021, dated 07-05-2021 notified the provisions of
section 269ST shall not apply to Hospitals, Dispensaries, Nursing Homes, Covid Care
Centres, or similar other medical facilities providing Covid treatment to patients.

The exemption is applicable for payment received in cash from 01.04.2021 to
31.05.2021, on obtaining the PAN or AADHAAR of the patient and the payee and the
relationship between the patient and the payee by such entities.

The notification inadvertently used the wording ‘payee’ instead of ‘payer’. Thus, the
board has issued a corrigendum to correct the word "payee" with "payer" in the context
of furnishing PAN or AADHAAR and furnishing of the relationship between the patient
and the payee.

The Finance Act, 2021 has discontinued the Income-tax Settlement Commission w.e.f.,
01-02-2021. It has also been provided to constitute an Interim board for settlement of
cases pending with the settlement commission.

The assesse (who had filed an application with the settlement commission) has the
option to withdraw such application within 3 months from the date of commencement
of the Finance Act, 2021. If not withdrawn, the application will be deemed to be received b
y the Interim Board on the date on which the application was allotted by the Board.

Now, the Central Board of Direct Taxes (CBDT) has inserted a new Rule 44DA to the
Income-tax Rules, 1961 to allow an assessee to choose option to withdraw his pending
application.

The Board has notified Form No. 34BB, which shall be filed electronically, in accordance with the procedures, formats and standards specified by the Principal Director-General of Income-tax (Systems) or Director-General of Income-tax (Systems).


Non Residents having income from transfer of capital asset referred to Sec. 47(vii ab) exempt from obtaining PAN vide Notification No.42/2021,dated 04-05-2021




Section 139A of the Income-tax Act contains the provision regarding the requirement to
obtain and quote PAN. Section 206AA provides that if a deductee fails to furnish his PAN to the deductor, tax is required to be deducted at a higher rate. However, these sections empower the CBDT to make rules providing the class or classes of person to whom these sections shall not apply.

In exercise of such power CBDT inserted a new sub-rule Rule 114AAB vide Notification No. 58/2020, dated 10-8-2020, wherein a non-resident investing in certain Category I or Category II AIFs were exempted from the application of provisions of these sections. Now, CBDT has amended Rule to further extend such exemption to non-residents investing in certain Category-III AIFs.

The board has notified that a non-resident, being an investor who operates in accordance with the SEBI, circular IMD/HO/FPIC/CIR/P/2017/003 dated 04-01-2017, shall not be required to obtain and quote PAN if the following conditions are satisfied:

a) Such investor has made the transaction in capital asset referred under Section
47(viiab), which are listed on a recognized stock exchange located in any IFSC;
b) Consideration on the transfer of such capital asset is paid or payable in foreign
currency;
c) Income from such transfer is the only income in India; and
d) Such investor has furnished the following details and documents to the stockbroker
through which the transaction is made:

  • Name, e-mail id and contact number;
  • Address in the country or specified territory of which he is a resident;
  • A declaration that he is a resident of a country or specified territory outside India;
    and
  • Tax Identification Number allotted in his home country and if such number is not
    available, then a unique number based on which the Government of his home
    country identifies him.
Further, such a stock broker is required to furnish a quarterly statement electronically in
Form No. 49BA and upload a declaration received from an investor within 15 days from the end of the quarter to which such statement relates.

Deduction Under Section 80-IA Income Tax Act Not Restricted To 'Business Income' Only: Supreme Court

Recently, the Supreme Court had an occasion to examine whether deduction
under section 80-IA of the Income-tax Act, 1961 shall be allowed to the extent of
gross total income of the eligible undertaking or it would be restricted to income
under the head Income from Business or Profession.
Aspects to be Considered on Application of MFN Clause of Tax Treaty

Recently, the Delhi High Court had an occasion to examine whether the Most
Favoured Nation (MFN) clause could be invoked, and the beneficial provision of
Double Tax Avoidance Agreement (DTAA) could be availed or not in IndiaNetherlands DTAA in case a third country becomes OECD member after India had
entered into DTAA with that country.

GST

Ad hoc Exemption from IGST on imports of specified COVID-19 relief material donated from abroad
CBIC had exempted Customs duty on import of Remdesivir and customs duty and
health cess on import of medical oxygen, oxygen concentrator etc. vide notification no: 27/2021–Customs dated 20 April 2021 and notification no:28/2021–Customs dated 24 April 2021 respectively. In addition to that CBIC has now exempted IGST on import of the goods specified in those notifications. The exemption shall be in force till 30 June 2021.
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