The Central Board of Direct Taxes ( CBDT ) has amended the tax audit form ( Form 3CD & Form No. 3CEB ) and Form for filing of tonnage tax application ( Form 65 ).
In Form 3CD, changes include the addition of clauses related to Section 115BAE tax regime, presumptive taxation u/s 44ADAD, etc. Form 65 is amended, requiring certification for IFSC unit status along with disclosure of availed deductions and cessation dates.
Form 3CD Amendments
Under Section 44AB, the ‘Tax Audit’ limit is set at Rs 5 crore (with a threshold limit of Rs 10 crore for businesses where at least 95% of transactions are conducted digitally). If a taxpayer is subject to audit, the process becomes more intricate, requiring the submission of not only a tax return but also a tax audit report to the Income Tax authorities. This is where we often encounter the term ‘Form 3CD.’
Likelihood of an extension of the MSME 45-Day Payment mandate
Tax auditors must disclose outstanding dues owed to micro and small enterprises in Form 3CD of the Tax Audit Report. The taxpayer is obligated to include the disallowed amount, as indicated in Form 3CD of the Tax Audit Report, in its total income.
Given that there have been no modifications to Form 3CD regarding Section 43B(h) of the Income Tax Act, the likelihood of an extension for the MSME 45-Day Payment mandate is minimal.
Simplified version of the changes in Form 3CD:
1. In Part A, Clause 8a, replace “115BAD” with “115BAD/115BAE.”
2. In Part B, Clause 12, substitute “44AD” with “44AD, 44ADA.”
Clause 18, replace sub-clause (ca) with adjustments to the written down value, including specific provisions for different assessment years.
Clause 19:
– Add a new row after “35(2AB)” for “35ABA.”
– Add another new row after “35E” for “any other relevant section.”
Clause 21:
– Sub-clause (a) under the ‘Nature’ column:
– Modify the wording related to penalties and fines for violations of laws.
– Insert a new row for “Expenditure incurred to compound an offence under any law.”
– Modify the wording related to expenditure for purposes violating laws.
– Sub-clause (b), in paragraph (ii), sub-paragraph (B), replace “payer” with “payee.”
Clause 26, substitute the brackets, letters, and word “(f) or (g)” with “(f), (g) or (h).”
Clause 32, sub-clause (a):
– In column (5), replace “115BAD” with “115BAD/115BAE.”
– In column (6), replace “115BAD” with “115BAD/115BAE.”
In Form No. 3CEB, a change is made in Part C ( Specified domestic transaction ). Serial number 25 will now become serial number 26, and a new entry is added before it. This new entry, numbered 25, focuses on specified domestic transactions related to business dealings between individuals mentioned in sub-section (4) of section 115BAE.
If the taxpayer has engaged in such a transaction resulting in profits exceeding the ordinary, they need to provide specific details:
(a) Name of the person involved in the specified domestic transaction.
(b) Description of the transaction, including any quantitative details.
(c) Total amount received or payable in the transaction, both as per books of account and as computed by the assessee considering the arm’s length price.
(d) Method used to determine the arm’s length price (refer to sub-section (1) of section 92C). The taxpayer needs to answer “Yes” or “No” to indicate whether such a transaction has occurred.
Form 65 has been amended with notable changes. A new clause (5) is added under the “Verification” section, requiring certification that the applicant company is an International Financial Services Centre ( IFSC ) unit and has filed the application within three months from the date when the deduction under section 80LA of the Income-tax Act, 1961 is no longer applicable.
In the Annexure of Form 65, PART A has been revised. Clause 6 now requires the date on which the company became a qualifying company (applicable only if the company becomes qualifying after the initial period). Additionally, a new clause 6A is introduced, inquiring whether the applicant company has availed of the deduction under section 80LA of the Income-tax Act, 1961, and if so, requesting the specific date on which such deduction is no longer applicable. This information should be supported by evidence.
In conclusion, the recent amendments to Tax Audit Forms 3CD, 3CEB, and Form 65 by the Central Board of Direct Taxes ( CBDT ) bring several changes, including the addition of clauses related to various tax regimes, presumptive taxation, and tonnage tax application.
In summary, the recent amendments to tax audit forms primarily address various tax-related aspects but do not suggest any extension or modification to the MSME 45-Day Payment mandate. Businesses should continue to adhere to the existing mandate until further notifications or changes are introduced by the relevant authorities.
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