SECTION 139 OF INCOME TAX ACT 1961 [upto Finance Act(no.2) 2019]
SECTION 139 OF INCOME TAX ACT
[AMENDED UPTO FINANCE
ACT(NO.2) 2019]
Ques 1: Why this post?
Ans:
In the approaching return filing season the aforesaid section namely ‘FILING OF
RETURN’ has a great importance and that too w.r.t. amendments it contains till
AY 2020-21 i.e. FY 19-20. Thus, the author has come up with the glance at the
major provisions of this section with few clarifications.
Ques 2: Is bird eye view of
the section 139 possible?
Ans: Attached image can be referred to
for the bird–eye view of Section 139 of Income Tax Act 1961. It contains 19
subsections. Few of them are not in existence from the stated dates, thus
ignored in our discussion. (Readers can refer bare act for their reference, author has tried
to be precise)
Ques 3: Who all have obligation to file return of income under section 139(1)?
Ans:
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Assessee
Covered
|
Situation
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a)
Company
or Firm
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In
every case
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b)
Any
other person other than company or firm
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It
total income exceeds maximum amount not chargeable to tax.
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Ques 4: What are the FOURTH
and FIFTH proviso to section 139(1)? Please elaborate with illustrations. First three provisos have been skipped as they are not relevant as
stated in summary chart.
Ans.
Fourth and Fifth proviso states that following person has to file return:
Any
person,
-
being
a resident other than not ordinarily resident in India,(i.e. ROR)
-
who
is not required to furnish a return under section 139(1), and
a)
who
holds, as a beneficial owner, any asset
(including any financial interest in any entity) located outside India or has
signing authority in any account located outside India
b)
who
is beneficiary of any asset (including any
financial interest in any entity) located outside India
However
an individual being a ‘beneficiary
referred in (b)’, where if any income arising from such asset is includible in
the income of the person referred to in
(a),
Then,
the beneficiary is not required to file return of income under this proviso.
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Author:
Explanation
4 and 5 defines the terms ‘beneficial owner’ and ‘beneficiary’ respectively.
Illustration: Parties Involved: Mr. K(ROR) , Mr
D(resident of Dubai) and Mr.F (Father of Mr. D lives in India)
Mr.
K gifted his rural agricultural land(not capital asset) to Mr. F, worth
Rs. 10 Crores.
Mr.
D buys a flat in Dubai in his name and gives an irrevocable power of attorney
to Mr. K to sell/gift/lease/transfer the flat in any manner, with clause that
home will be transferred to Mr. K/his wife after 10th year.
As per Explanation 4: "beneficial
owner" in respect of an asset means an individual who has provided,
directly or indirectly, consideration for the asset for the immediate or
future benefit, direct or indirect, of himself or any other person
Therefore,
although the flat in Dubai is not in the name of Mr. K, but he is beneficial
owner of the flat since he has
-
provided
consideration indirectly
-
for
the flat which is for immediate or future benefit
-
direct
or indirect
-
of
Mr. K or his wife
Illustration:
Mr. A (ROR), transferred his black money INR 5crores to Mr. B in Singapore
through Hawala. Now Mr. B forms a Trust in Singapore, donates the sum in
Trust and buys securities of INR 5Crores through trust. Mr. A is the sole
beneficiary of Trust and Mr. A donot have taxable income in India.
As per Explanation 5: “beneficiary"
in respect of an asset means an individual who derives benefit from the asset
during the previous year and the consideration for such asset has been
provided by any person other than such beneficiary
Thus
Mr. A satisfies the definition of beneficiary, hence he is under obligation
to file return of income under fourth proviso.
Illustration:
Mr. X(ROR) has substantial incomes in India and Mrs. X(ROR) does not have any
income. Mr. X opens an account in the wife’s name in Australia and transfers
INR 2 Crores of his taxable income to his wife’s account. Mrs. X purchases a
house property from the bank balance of INR 2 Crores in Australia in her name.
Now,
Mr. X is the beneficial owner and Mrs. X is the beneficiary w.r.t. the house
in Australia.
As
per Fifth proviso, Mrs. X is not under obligation to file return of income,
if income from house property in Australia is clubbed with income of Mr. X.
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Ques 5: Under SIXTH proviso
to section 139(1) who is required to file Return of Income?
Ans:
This is applicable to all assesses other than Company and Firm
If
total income before giving effect to the following benefits exceeds the maximum
amount not chargeable to tax, then, the person has to file return of income:
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Section:
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In
relation to:
|
|
10(38)
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LTCG
exemption
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10A
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For
newly established undertakings in free trade zone
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10B
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For
newly established 100% per cent export-oriented undertakings
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10BA
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For
of export of certain articles or things
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54, 54B, 54D, 54EC, 54F, 54G, 54GA, 54GB
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For
persons availing rollover benefit of capital gains exemptions. [inserted by Finance Act(No.2) 2019]
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Chapter
VIA
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Deductions
under Section 80C-80U
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To
illustrate lets say a senior citizen who has interest income of Rs. 1 lakh,
sells his residential house and earns capital gains of Rs. 15 lakhs. He
reinvests the entire gains in bonds issued under section 54EC. Now even if his
tax liability is Nil, then also he has to file return under sixth proviso to
section 139(1).
The
ptoviso does not apply if the total income of a person including capital gains
does not exceed the maximum amount not chargeable to tax.
Ques 6: Who all are
required to file return of income under newly inserted SEVENTH
proviso to Section 139(1)?
Ans:
Seventh proviso to section 139 has been inserted with effect from 1st April
2020 to provide for furnishing of return by a person who is otherwise not
required to furnish a return under section 139(1), if such person during the
previous year—
i)
has deposited an amount or aggregate of
the amounts exceeding Rs.1 crore in one or more current account maintained with
a banking company or a co-operative bank; or
ii) has
incurred expenditure of an amount or aggregate of the amounts exceeding Rs. 2
lakhs for himself or any other person for travel to a foreign country; or
iii) has
incurred expenditure of an amount or aggregate of the amounts exceeding Rs. 1
lakh towards consumption of electricity; or
iv) fulfils
such other conditions as may be prescribed.
Note:
1) The limits stated in the conditions
are for a previous
year and hence, for every assessment year, it has to be examined whether the
condition is fulfilled or not.
2)
The aforesaid conditions are in alternative; hence a return of income will have
to be filed even if any one of the aforesaid condition is fulfilled.
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Analysis of Condition –
(i)
·
The
proviso applies only if the deposit/deposits are made in a current account;
it will not apply if such deposits are made in a savings account.
·
The
deposit may be made in cash or by cheque or by any other electronic mode. It
may even be made by transfer from another bank account, including a current
account. (Since the
intent of law makers is to ensure that persons who enter into certain high
value transactions do furnish their return of income. Thus, considering only
cash deposits will defeat the intent of law makers.)
·
The
deposit has to be made in one or more current accounts 'maintained with a
banking company or a co-operative bank'. 'A'
is often interpreted as 'any' and
not 'one' [see CIT v. Khoobchand M.
Makhija [2014] (Kar.); CIT v. D.
Ananda Basappa [2009] (Kar.)]. In the context, it appears that the 'a'
banking company may be read as any banking company and the aggregate of
deposits in all current accounts should be reckoned to ascertain whether the
limit of Rs. 1 crore is fulfilled or not.
·
It
is the aggregate of all such deposits made by the person that is relevant
during a previous year for the purpose of the condition.
·
On
a literal reading, the deposit may be made in the current account maintained
by the person or by any other person. To illustrate, if an individual directly
deposits Rs. 1 crore in a current account maintained by another person
"B", the said deposit will be reckoned for the purpose of
calculating the aggregate sum of Rs. 1 crore. However, it is to be noted that
while clause (i) is silent as to who maintains the account with the bank,
clause (ii) expressly refers to foreign travel expenses for himself or any
other person. This suggests that clause (i) ought to be reasonably construed
as an account being maintained by the assessee. Further it will be difficult to track the
amount deposited by one person in another person’s account.
Analysis of Condition –
(ii)
·
The
expenditure may be incurred in Indian rupees (say, for purchase of tickets)
or in foreign currency.
·
The
expenditure may be incurred in cash or in cheque or by for-ex card or by any
other electronic mode.
·
The
person should have incurred expenditure of an amount or aggregate of amounts
exceeding Rs. 2 lakh for himself or any other person. The word 'or' gives an
impression that the condition would be fulfilled only if a person incurred
expenditure exceeding Rs. 2 lakh for himself or any other person. In other
words, if the individual spends say Rs. 1.75 lakh on himself or another Rs. 1.25
lakh on his wife, the condition will not be triggered. This appears to be
unintended.
·
It
is the person who incurs the expenditure needs to file his return of income
and not the person on whose behalf the expenditure is incurred
Other points worth evaluation:
·
As per literal interpretation, the condition
applies to non-residents also; hence, if a non-resident's son meets the
foreign travel expenses of his parents which exceed Rs. 2 lakh, he will have
to file a return of income.
·
The
condition applies only if expenditure for 'travel' to a foreign country exceeds Rs. 2 lakh.
The word 'travel' has been explained
as: "go from one place to another,
make a journey, especially of some length or abroad" [New India Assurance Co. Ltd. v. Annakutty
AIR 1993 Ker. 299]
Thus, travel means a journey or going
to a particular place. It could therefore be argued that the expense for
travel to the foreign country means the ticket expenses and not the
subsequent lodging, boarding, and sightseeing expenses. It may be noted that
broader meaning had been given to the word in the context of erstwhile
section 37(3) [see Beardsell
Ltd. v. CIT [2000] (Mad.)].
The limitation in that section was on travelling expenses (including hotel
expenses). A safer view is that the condition under section 139 covers all
expenses.
·
Explanation
3 to this sub section read as follows:
For the purposes of this sub-section, the expression "travel to
any foreign country" does not include
travel to the neighbouring countries or to such places of pilgrimage as the Board may specify
in this behalf by notification in the Official
Gazette.
NOTIFICATION
NO. S.O. 508(E), DATED 11th June, 2001
Neighbouring countries includes
Bangladesh, Bhutan, Maldives, Nepal, Pakistan and Sri Lanka
NOTIFICATION
NO. S.O. 508(E), DATED 11th June, 2001
Travel to Saudi Arabia on Haj pilgrimage
and to China on pilgrimage to Kailash Mansarover
Now the issue is seventh proviso has
been inserted by Finance Act (No.2) 2019, but the above explanation 3 is there from a way back from 2001 and so
are the above notifications issued in June 2001. Thus whether the same shall
be applicable to the newly inserted seventh proviso?
Analysis of Condition –
(iii)
·
The expenditure may be incurred by cash
or cheque or by any other electronic mode
·
The consumption of electricity may be for
residential purposes or business purposes.
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Ques 7: What are the
provisions related to Loss Return under section 139(3)?
Ans:
Section 80 read with Section 139(3) provides that the loss under the section
72(1)[Business
Loss], or section 73(2)[Speculation
loss], or section 73A(2)[Specified
Business u/s 35AD Loss] or section 74(1)&(3)[Captial
Loss], or section 74A(3) [O/M
Horse races Loss] cannot be carried forward if ROI is filed
after the due date specified in section 139(1).
1)
Loss
under head “Income from house property” can be carried forward if ROI is
furnished after the due date.
2) Losses can be setoff even if ROI is furnished after due date u/s 139(1).
3) Unabsorbed depreciation is governed by
Sec 32 of Income tax Act, thus can be carried forward even if the ROI is
furnished after due date and even if ROI has not been furnished.
Ques
8: What are the provisions related to Belated Return under section 139(4)?
Ans: If a person has not furnished the
return of income within the time allowed under section 139(1), then he may
furnish the return of income at any time
before the end of the relevant Assessment Year or before the completion of
assessment whichever is earlier.
Ques
9: What are the provisions related to Revised Return under section 139(5)?
Ans: If any person, having furnished a
return under section 139(1) or section 139(4), discovers any omission or any
wrong statement therein, he may furnish a revised return at any time before the end of the relevant assessment year or before
the completion of the assessment, whichever is earlier.
The revised return substitutes the
original return from the date the original return was filed [Dhampur Sugar Mills Limited]
A loss return filed belatedly under
section 139(4) can be revised under section 139(5), but loss is not allowed to
be carried forward as original return was itself filed belatedly.
Ques
10: What are the provisions related to Defective Return under section 139(9)?
Ans: A return of income shall be regarded
as defective return unless it is accompanied by the documents stated in the
explanation to Section 139(9).
If the Assessing Officer considers that
the return is defective, he may intimate the defect to the assessee and give
him an opportunity to rectify the defect within fifteen days from the date of such intimation. He can extend this
time period on an application made by the assesse. If the defect is not
rectified within fifteen days or, the extended time, then, the return shall be
treated as an invalid return and it shall be deemed as if the assessee has
failed to furnish the return.
BY: SHUBHAM BANSAL
CA, CS, M.Com(F&T),
ISA(ICAI), B.Com(H.)
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