Amendment in Income tax rules, Income Tax Return, Tax Audit Forms and Form 3CEB - CBDT Notification No. 82/2020

Recently, CBDT has issued a notification which clarifies the compliance requirements for the assesses, opting for concessional rate of tax under New Tax Regime, i.e., Section 115BAA, Section 115BAB, Section 115BAC & Section 115BAD.

The CDBT has made the following amendment (Income-tax (22^nd Amendment) Rules, 2020) vide Notification No. 82/2020 dated 01.10.2020:

1.    Amendments in Income Tax Rules, 1962:

A. Maximum depreciation on any block of assets has been restricted to 40%

In the said notification, the rate of depreciation has been restricted to 40% i.e., one can claim depreciation maximum upto 40% on the WDV of block of asset. The following has been provided in respect of rate of depreciation:

“Provided that the allowance under clause (ii) of sub-section (1) of section 32 in respect of depreciation of any block of assets entitled to more than forty per cent. shall be restricted to forty per cent. on the written down value of such block of assets in case of -

(i) a domestic company which has exercised option under sub-section (4) of section 115BA, or under sub-section (5) of section 115BAA, or under sub-section (7) of section 115BAB; or

(ii) an individual or Hindu undivided family which has exercised option under sub-section (5) of section 115BAC; or

(iii) a co-operative society resident in India which has exercised option under sub-section (5) of section 115BAD:

B. Treatment of Unabsorbed additional depreciation u/s. 32(1)(iia):

The amount in respect of unabsorbed additional depreciation u/s. 32(1)(iia) shall not allowed to be carried forward and shall be added to the opening WDV of block of assets in the previous year relevant to the assessment year in which option has been exercised. The following has been provided in the said notification in connection to the treatment of unabsorbed depreciation. 

Provided further that, for the purposes of section 115BAA, if the following conditions are satisfied, namely: -

(i) option under sub-section (5) thereof is exercised for a previous year relevant to the assessment year beginning on the 1st day of April, 2020;

(ii) there is a depreciation allowance, in respect of a block of asset, from any earlier assessment year or allowance of unabsorbed depreciation deemed so under section 72A, which is attributable to the provisions in clause (iia) of sub-section (1) of section 32; and

(iii) such depreciation or allowance for unabsorbed depreciation is not allowed to be set off under clause (ii) or clause (iii) of sub-section (2) thereof, the written down value of the block of asset as on the 1st day of April, 2019 shall be increased by such depreciation or allowance for unabsorbed depreciation not allowed to be set off:

Provided also that, for the purposes of section 115BAC and section 115BAD, if the following conditions are satisfied, namely: -

(i) the option under sub-section (5) of the respective section is exercised for a previous year relevant to the assessment year beginning on the 1st day of April, 2021;

(ii) there is a depreciation allowance, in respect of a block of asset, from any earlier assessment year which is attributable to the provisions in clause (iia) of sub-section (1) of section 32; and

(iii) such depreciation is not allowed to be set off under sub-clause (a) of clause (ii) of sub-section (2) of section 115BAC or clause (ii) of sub-section (2) of section 115BAD, the written down value of the block of asset as on the 1st day of April, 2020 shall be increased by such depreciation not allowed to be set off.”;

C.   Forms for exercising options u/s 115BAC & 115BAD :

The CBDT has introduced Rule 21AG and Rule 21AH which notifies the form 10-IE and 10-IF, which needs to be submitted by the assessee exercising option u/s. 115BAC (applicable to Individual / HUF) and u/s 115BAD (applicable to cooperative society) of the Act, respectively. The format of these forms has also been provided in the notification and it has been stated that these forms are required to be filed electronically. You may refer Rule 21AG and Rule 21AH of the Income Tax in the below given links.

Click here for Rule 21AG

Click here for Rule21AH

2.    Amendments in Tax Audit Report (Form 3CD):

The CBDT has also provided for the amendment in Form 3CD to give effect to the provisions of new tax regime for opting concessional or lower rate of tax. Assessees are now required to report details of section under which option has been exercised and treatment related to unabsorbed additional depreciation. The format of reporting in Form 3CD is as follows:

(i) in Part A, after serial number 8 and the entries relating thereto, the following shall be inserted, namely: -

“8a. Whether the assessee has opted for taxation under section 115BA/115BAA/115BAB?”;

(ii) in Part B, -

(I) in serial number 18, after clause (c), the following clauses shall be inserted, namely: -

“(ca) Adjustment made to the written down value under section 115BAA (for assessment year 2020-21 only) ………….

(cb) Adjusted written down value …………………………….”;

(II) in serial number 32, for clause (a), the following clause shall be substituted, namely: -

“(a) Details of brought forward loss or depreciation allowance, in the following manner, to the extent available:

 

Sl No	Assess-ment Year	Nature of loss/allow-ance (in rupees)	Amount as retur-ned* (in rupees)	All losses/allo-wances not allowed under section 115BAA	Amount as adj-usted by withdrawal of additional dep-reciation on account of opting for taxation under section 115BAA^	Amounts as assessed (give refe-rence to relevant order)	Remarks
(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)

*If the assessed depreciation is less and no appeal pending than take assessed.

^ To be filled in for assessment year 2020-21 only.”; 

 3.   Amendments in Form 3CEB:

The CBDT has also amended Form 3CEB to report details of specified domestic transactions with any new manufacturing domestic companies who have exercised option u/s. 115BAB for availing concessional tax rate of 15%. The amendment has been made to provide the details whether the transaction has been carried out at arm’s length price or not. The notification has provided the following in respect of reporting requirements:

 

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Particulars in respect of specified domestic transaction in the nature of any business transacted between the persons referred to in sub-section (6) of section 115BAB: Has the assessee entered into any specified domestic transaction(s) with any persons referred to in sub-section (6) of section 115BAB which has resulted in more than ordinary profits expected to arise in such business? If “yes”, provide the following details: (a) Name of the person with whom the specified domestic transaction has been entered into (b) Description of the transaction including quantitative details, if any. (c) Total amount received/receivable or paid/ payable in the transaction - (i) as per books of account; (ii) as computed by the assessee having regard to the arm’s length price. (d) Method used for determining the arm’s length price [See section 92C(1)].

Yes/ No           ________”;

 

  4.   Amendments in Income Tax Return Form - ITR-6:

The similar kind of amendments have also been introduced in ITR form to report treatment related to unabsorbed additional depreciation i.e., addition in opening block of WDV and brought forward unabsorbed additional depreciation, along with reporting of other brought forward losses which are not allowed under new tax regime.

So, in nutshell this notification is all about compliances to be made by the assessees, opting for concessional rate of tax under New Tax Regime in respect to WDV of asset, brought forward and carry forward of losses & unabsorbed additional depreciation and reporting of specified domestic transactions with new domestic mfg. co. exercising option u/s. 115BAB. The said notification can be accessed in the below given link.

Notification No. 82/2020

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Advisory: Information relates to the law prevailing in the year of publication as indicated. The above article is only to enable public to have a quick and an easy understanding to analyze the amendments. Viewers are advised to ascertain the correct position/prevailing law before relying upon any document.