Amendment in relation to ICDS [Sees. 145A and 145B] w.e.f. Assessment Year 2019-2020 under Income Tax Act.

The Delhi High Court has made a few observations on the issue of applicability of ICDS in the case of Chamber of Tax Consultants v. UOI [2017] 87 taxmann.com 92 (Delhi). In order to bring certainty in the wake of these pronouncements, the following amendments have been made from the assessment year 2017-18 —

1.         Section 36 has been amended to provide that marked to market loss or other expected loss as computed in the manner provided in ICDS shall be allowed deduction.

2.         Section 40A has been amended to provide that no deduction or allowance in respect of marked to market loss or other expected loss shall be allowed except as allowable under newly inserted provisions of section 36(1)(xviii).

3.         Section 43AA has been inserted to provide that any gain or loss arising on account of effects of changes in foreign exchange rates in respect of specified foreign currency transactions shall be treated as income or loss, which shall be computed in the manner provided in ICDS.

4.         A new section 43CB has been inserted to provide that profits arising from a construction contract or a contract for providing services shall be determined on the basis of percentage of completion method, except for certain service contracts, and that the contract revenue shall include retention money, and contract cost shall not be reduced by incidental interest, dividend and capital gains.

5.         New sections 145A and 145B have been inserted. These provisions are given below.

Method of accounting in certain cases [Sec. 145A] - For the purpose of determining the income chargeable under the head “Profits and gains of business or profession”, the following valuation rules will apply —

1.         The valuation of inventory shall be made at lower of actual cost or net realizable value computed in the manner provided In ICDS.

2.         The valuation of purchase and sale of goods or services and of inventory shall be adjusted to include the amount of any tax, duty, cess or fee actually paid or incurred by the assessee to bring the goods or services to the place of its location and condition as on the date of valuation.

3.         Inventory (being securities not listed, or listed but not quoted, on a recognised stock exchange) shall be valued at actual cost initially recognised in the manner provided in ICDS.

4.         Inventory (being securities held by a scheduled bank or financial institution) shall be valued in accordance with ICDS after taking into account extant guidelines issued by the RBI.

5.         Inventory (being listed securities) shall be valued at lower of actual cost or net realisable value in the manner provided in ICDS and for this purpose the comparison of actual cost and net realisable value shall be done category-wise.

6.         Any tax, duty, cess or fee, by whatever name called, under any law for the time being in force, shall include all such payment notwithstanding any right arising as a consequence of such payment for the purposes of the said section.

Taxation on certain incomes [Sec. 145B] - Section 145 provides mode of taxation of the following incomes —

1.         Interest received by an assessee on compensation or on enhanced compensation, shall be deemed to be the income of the year in which it is received.

2.         The claim for escalation of price in a contract or export incentives shall be deemed to be the income of the previous year in which reasonable certainty of its realisation is achieved.

3.         Assistance in the form of subsidy (or grant or cash incentive or duty drawback or waiver or concession or reimbursement) as referred to in section 2(24)(xviii) shall be deemed to be the income of the previous year in which it is received, if not charged to income tax for any earlier previous year.

 
 
Amendment at a Glance for A.Y. 2019-20
Amendment to [Sec.-2(24)] Amendment to [Sec.-2(42A)] Amendment to [Sec.-9]
Amendment to [Sec.-16 & 17] Amendment to [Sec.-28] Amendment to [Sec.-36 & 40A]
Amendment to [Sec.-43] Amendment to [Sec.-43CA] Amendment to [Sec.-44AE]
Amendment to [Sec.-49] Amendment to [Sec.-56(2)(x)] Amendment to [Sec.-79]
Amendment to [Sec.-80AC] Amendment to [Sec.-80D] Amendment to [Sec.-80DDB]
Amendment to [Sec.-80IAC] Amendment to [Sec.-80JJAA] Amendment to [Sec.-80PA]
Amendment to [Sec.-80TTA] Amendment to [Sec.-80TTB] Amendment to [Sec.-115AD]
Amendment to [Sec.-115BA] Amendment to [Sec.-115BBE] Amendment to [Sec.-115JB]
Amendment to [Sec.-115O & 115Q] Amendment to [Sec.-115R & 115T] Amendment to [Sec.-139A]
Amendment to [Sec.-140] Amendment to [Sec.-143] Amendment to [Sec.-145A & 145B]
Amendment to [Sec.-193] Amendment to [Sec.-194A] Amendment to [Sec.-145O & 245Q]
Amendment to [Sec.-271FA] Amendment to [Sec.-276CC] Amendment to [Sec.-286]
 
 
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