Corporate Tax Law

Dr. Manoj Kumar Sharma

Rajiv Gandhi National University of Law, Punjab
Important Concepts
Company 2(17)
 Any Indian company, or
 Any body corporate incorporated by or under the laws of a
country outside India, or
 Any institution, association or body which is or was assessable or
was assessed as a company for any assessment year under the
Indian Income-tax Act, 1922 (11 of 1922), or which is or was
assessable or was assessed under this Act as a company for any
assessment year commencing on or before the 1st day of April,
1970, or
 Any institution, association or body, whether incorporated or not
and whether Indian or non-Indian, which is declared by general or
special order of the Board to be a company :
Provided that such institution, association or body shall be
deemed to be a company only for such assessment year or
assessment years as may be specified in the declaration
2(18) Company in which the public are
substantially interested
A company is said to be a company in which the public are substantially
interested
 Company owned by the Government or the Reserve Bank of India
 Company in which not less than 40% of the shares are held by the
Government or the Reserve Bank of India or a corporation owned by that
bank
 Section 8 Companies (Section 25, Companies Act, 1956)
 Company having no share capital and if, having regard to its objects, the nature
and composition of its membership and declared by order of CBDT to be a
company in which the public are substantially interested
 Mutual benefit finance company which carries on as its principal business, the
business of acceptance of deposits from its members and which is declared by
the Central Government to be a Nidhi or Mutual Benefit Society
 Companies in which 50% or more shares are held by one or more co-
operative societies
 A public limited company
Public Limited Company
 Company which is not a private company
◦ Shares in the company were, as on the last day of the relevant
previous year, listed in a recognized stock exchange in India or
◦ Shares carrying not less than 50% of the voting power were
throughout the relevant previous year beneficially held by—
 the Government, or
 a corporation established by a Central, State or Provincial Act, or
 A company in which public is substantially interested or its wholly owned
subsidiary
 Indian company whose business consists mainly in the
construction of ships or in the manufacture or processing of
goods or in mining or in the generation or distribution of
electricity or any other form of power, 50% is replaced by
40%
Indian Company – 2(26)
 Indian company means a company formed and registered
under the Companies Act
 A corporation established by or under a Central, State or
Provincial Act
 Any institution, association or body which is declared by the
Board to be a company
 In the case of the State of Jammu and Kashmir, a company
formed and registered under any law for the time being in
force in that State
 In the case of any of the Union territories of Dadra and
Nagar Haveli, Goa, Daman and Diu, and Pondicherry, a
company formed and registered under any law for the time
being in force in that Union territory :
Registered or principal office of the company, corporation,
institution, association or body in all cases must be in India
 Domestic Company 2 (22A)
◦ an Indian company, or
◦ any other company which, in respect of its
income liable to tax under this Act, has made
the prescribed arrangements for the
declaration and payment, within India, of the
dividends (including dividends on preference
shares) payable out of such income
 Foreign Company 2(23A) – A company
which is not a domestic company
Infrastructure Capital Company –
2(26A)
 company which makes investments by way of
acquiring shares or providing long-term finance to
any enterprise or undertaking wholly engaged in
the business of
◦ developing or operating and maintaining or
developing, operating and maintaining any
infrastructure facility
◦ an undertaking developing and building a housing
project
◦ a project for constructing a hotel of not less than
three-star category as classified by the Central
Government or
◦ a project for constructing a hospital with at least one
hundred beds for patients;
 Closely Held Company – in which public
are substantially interested
 Widely held company – in which public
are not substantially interested
Dividend 2(22)
Dividend includes—
 any distribution by a company of accumulated profits, whether capitalised or
not, if such distribution entails the release by the company to its shareholders
of all or any part of the assets of the company ;
 any distribution of debentures, debenture-stock, or deposit certificates in any
form, whether with or without interest, and any distribution to its preference
shareholders of shares by way of bonus, to the extent to which the company
possesses accumulated profits, whether capitalised or not ;
 any distribution made to the shareholders of a company on its liquidation, to
the extent to which the distribution is attributable to the accumulated profits
of the company immediately before its liquidation, whether capitalised or not;
 any distribution to its shareholders by a company on the reduction of its
capital, to the extent to which the company possesses accumulated
profits whether such accumulated profits have been capitalised or not ;
◦ Distribution of accumulated profits
◦ Distribution of capital (CIT v. Narasimhan 1999, 236 ITR 327 SC)
Deemed dividend 2(22)(e)
 any payment by a company, not being a company in
which the public are substantially interested, of any
sum made after the 31st day of May, 1987, by way of
advance or loan to a shareholder, being a
person who is the beneficial owner of shares
(not being shares entitled to a fixed rate of dividend
whether with or without a right to participate in
profits) holding not less than ten per cent of the
voting power, or to any concern in which such
shareholder is a member or a partner and in which
he has a substantial interest or any payment by any
such company on behalf, or for the individual benefit,
of any such shareholder, to the extent to which the
company in either case possesses accumulated profits
Dividend does not include—
◦ a distribution made in case of reduction of capital or liquidation in
respect of any share issued for full cash consideration, where the
holder of the share is not entitled in the event of liquidation to
participate in the surplus assets ;
◦ any advance or loan made to a shareholder by a company in the
ordinary course of its business, where the lending of money is a
substantial part of the business of the company ;
◦ any dividend paid by a company which is set off by the company
against the whole or any part of any sum previously paid by it and
treated as a deemed dividend to the extent to which it is so set off;
◦ any payment made by a company on purchase of its own shares
from a
◦ any distribution of shares pursuant to a demerger by the resulting
company to the shareholders of the demerged company whether or
not there is a reduction of capital in the demerged company
Domestic Company 25%
If turnover is upto 250 Crores
during PY 2017-18
Other Domestic companies 30%

Surcharge – If Total Income is from 01 to 10 Crores – 7%

If total income exceeds 10 Crores – 12%
Marginal Relief
Education Cess – 4%
Foreign Company 40%

Surcharge – If Total Income is from 01 to 10 Crores – 2%

If total income exceeds 10 Crores – 5%
Marginal Relief
Education Cess – 4%
Rates of Tax
 111A – 15%
 112A – 10%
 112 – 20%
 115BB- Horse races, lotteries, cross word puzzles
– 30%
 115-BBD - assessee, being an Indian company –
income includes income by way of dividends declared,
distributed or paid by a specified foreign company ---
15%
 specified foreign company" means a foreign company
in which the Indian company holds twenty-six per
cent or more in nominal value of the equity share
capital of the company
DDT
 Domestic Company on Dividends declared,
distributed or paid other than deemed dividend
 Closely held company to pay DDT on deemed
dividend – 30% (01/04/2018) within 14 days
 DDT – 15% (115-O)+ surcharge @ 12%+HEC
@4% = 17.472% (Grossing up to be
done…effective rate 20.55529%)
 Interest @ 1% p.m. for failure to deposit DDT
 Penalty u/s 271C – 100%
 Imprisonment not less than three months
extendable to 7 years and fine
Buy Back of Shares – 115QA-QC
 Domestic Company
 Buy Back of shares
 Income distributed i.e. price paid is higher
than the price charged
 Additional Income Tax – 20%+12%
SC+4%HEC = 23.296%
 To be deposited within 14 days
MAT – Minimum Alternate Tax
 MAT – 18.5% of Book profits + Surcharge,
if any+ HEC @4%
 MAT provisions applicable to foreign
companies, if there is PE in India –
separate computation of profits
attributable to operations in India
 Report in Form no. 29B by CA – 115
JB(4)
Tax Credit of MAT 115 JAA
 MAT Credit = Tax paid u/s 115JB-Tax
calculated at normal rates
 Carry forward for 15 AY after 2006-07
 Adjustment in the year in which regular
tax exceeds MAT (Regular tax-MAT =
MAT credit adjustment) subject to the
provision that MAT for that year has to
be paid
Computation of Total Income –
Company Assessee
 Compute Income under all heads except Salary
 Clubbing u/s 60 and 61
 Adjustment for set off of brought forward losses
 Deductions under Chapter VIA
◦ 80G – Donations
◦ 80 GGB, 80 GGC
◦ 80 IA
◦ 80 IAB
◦ 80 IB
◦ 80 IE
◦ 80 JJA
◦ 80JJAA
Return of Income
 Return Form – ITR -6
 30th September /30th November
 Return to be filed Online under digital
signatures
 Belated Return
 Revised Return
 Assessment Procedure
 Summary Assessment – No intimation u/s 143(1)
after one year from the end of FY in which return is
filed
 Deemed Intimation – where neither tax nor refund is
due
 Regular/Scrutiny Assessment – 143(3)- Mandatory
notice to be sent – No notice can be served after
expiry of six months from the end of FY in which
return is filed
 Regular Assessment on following Grounds
◦ Understated the income
◦ Computed excessive loss
◦ Underpaid tax
 Hearing of the matter
 Best Judgment Assessment
◦ When return not filed
◦ When notice u/s 142, (1) or 142(2A) or 143(2) not complied
with
◦ Opportunity to assessee
 Income Escaping Assessment
◦ Reassessment of escaped income or recomputation of
loss/allowances
◦ Notice to furnish fresh return after recording reasons
 Notice within 4 years from the end of RAY
 Within 6 years from the end of RAY – if income escaped is more than 1
lakh (after 4 years notice with the permission of CCIT)
 Within 16 years from the end of RAY – if income, in relation to any asset
located outside, has escaped assessment (after 4 years notice with the
permission of CCIT)
◦ Scrutiny Assessment – notice within 6 months from the end of
the month in which return filed
Interest Payable by Assessee
 Late payment of Tax Demand- 1% p.m.
 Late filing of return – 234A – 1% p.m. on tax due
 Default in payment of advance tax – 234B
◦ AT not paid
◦ AT is less than 90% of the assessed tax
◦ 1% p.m. from 01st April of AY on assessed tax
 Deferment of Advance Tax – 234C – 1%
◦ If AT upto 15th June is less than 12% - for three months
◦ If AT upto 15th September is less than 36% - for 3 months
◦ If AT upto 15th December is less than 75% - for 3 months
◦ If AT upto 15th March is less than 100% - for one month
 Interest on Excess Refund – 0.5% p.m.
 Penalties
Section Nature of default Penalty
140A(3) Failure to pay wholly or partly— Such amount as Assessing Officer
(a) self-assessment tax may impose but not exceeding tax in
(b) interest, and fee, arrears
(c) both
under section 140A(1)
221(1) Default in making payment of tax Such amount as Assessing Officer
may impose but not exceeding
amount of tax in arrears
270A(1) Under-reporting and misreporting A sum equal to 50% of the amount of
of income tax payable on under-reported
income.

If under-reported income is in due to

any misreporting, the penalty shall be
equal to 200% of the amount of tax
payable on under-reported income
271A Failure to keep, maintain, or Rs. 25,000
retain books of account,
documents, etc., as required
under section 44AA
271AA(1)  Failure to keep and maintain 2% of value of each international
information and documents transaction/or SDT
required by section
92D(1) or 92D(2)
 Failure to report such
transaction
 Maintaining or furnishing
incorrect information or
document
271AA(2) Failure to furnish information Rs. 5,00,000/-
and document as required
under Section 92D(4)

271B Failure to get accounts audited 0.5% of total sales, turnover or gross
or furnish a report of audit as receipts, etc., or Rs. 1,50,000,
required under section 44AB whichever is less
271AAB(1 Admission of undisclosed income
A) made by the assessee in the course
of search initiated on or after 15-
12-2016
Other Cases where undisclosed
income is found in search initiated specified previous year in any
before or after 15-12-2016
271BA Failure to furnish a report from an
accountant as required by section
92E
271C Failure to deduct tax at source
or failure to pay DDT u/s 115-
O(2)
271CA Failure to collect tax at source
30% of undisclosed income of the
specified previous year if
(a)Assessee admits the income
(b)Substantiates the manner in
which income was earned
(c)Deposits the tax alongwith
interest
60% of undisclosed income of the
other case.
Rs. 1,00,000
100%
100%
271B Failure to get accounts audited 0.5% of total sales, turnover or gross
or furnish a report of audit as receipts, etc., or Rs. 1,50,000,
required under section 44AB whichever is less

271BA Failure to furnish a report from Rs. 1,00,000

an accountant as required
by section 92E

271C Failure to deduct tax at source 100%

or failure to pay DDT u/s 115-
O(2)

271CA Failure to collect tax at source 100%

Set off and Carry Forward of Losses
 Intra Head Adjustment/Inter Source
Adjustment of Losses – 70
◦ Loss from Speculation Business
◦ Loss from activity of owing and maintaining
race horses
◦ Loss on account of lottery etc
◦ Capital Losses
◦ Loss from Specified Business
Inter Head Adjustment of Losses
 Loss from B/P can not be set off against
Salary
 Capital Losses
 HP Losses upto 200000 only
 Speculation Loss
 Loss from activity of owing and
maintaining race horses
 Loss on account of lottery etc
 Loss from Specified Business
Carry Forward of Losses
 HP Loss – 8 AYs
 Business loss – 8 years
 Speculation Business Loss – 4 years
 Capital Loss – 8 years
 Loss from activity of owing and maintaining race
horses – 4 years
 Loss from Specified Business - Until fully set off
 Return of Loss to be filed within the due date
 HP loss can be carried forward even if return of
loss filed late
 Unabsorbed depreciation can be carried forward
even if return of loss filed late
Closely Held Company
 No loss to be carried forward and set off
unless 51% of the voting power is same as
was in the year in which loss incurred
 Eligible start up – all shareholders
continue to hold those shares and losses
were incurred within 7 years
 However, if change in shareholding is due
to resolution plan approved under IBC, it
will be ignored
Appeals and Revisions
 Appeal against the order of AO
◦ Only assessee can file
◦ Appeal lies to CIT (Appeals)
◦ Form no. 35
◦ Within 30 days
 Second Appeal to ITAT
◦ Both assessee and department can file
◦ Within 60 days
◦ Form No. 36
 Appeal against the decision of ITAT
◦ High Court/NTT
 Appeal against he decision of High
Court/NTT
◦ Supreme Court
 Revision
◦ By CIT on his own, if decision is prejudicial to
the interest of the revenue
◦ By the assessee (Revision in favour of
assessee)
 Prescribed fee to be deposited
◦ Computed income is upto 1 lac – Rs. 250
◦ 100000 – 200000 – Rs 500
◦ Above Two lacs – Rs. 1000
 Pre Deposit of Tax Due
 Hearing of the case
Net Profit as per books 25,00,000 after the
following adjustments
Amounts credit to P & L
 Withdrawn from General Reserve- 2 lacs
 Withdrawn from revaluation reserve – 2
lacs
 Income on units of UTI – 1 lac
 LTCG on transfer of shares (STT paid) –
3 lacs
Amounts debited to P & L include
 Depreciation – 6 lacs
 Wealth Tax – 1 lac
 Income Tax – 5 lacs
 Interest on Income Tax – .30 lacs
 Excise duty due (paid after filing of
return) 1.5 lacs
 Dividend proposed – 3 lacs
 Depreciation on revaluation of assets –
1.5 lacs
Other information
 B/f losses (as per Income Tax) 10 lacs, for
accounting purposes - 5 lacs
 Unabsorbed depreciation – as per Income
tax - 5 lacs, for accounting purposes – 3
lacs
 Depreciation allowable as per income tax
rules – Rs. 10 lacs
Thank
You