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25
November 2016
 Tax(The Total Investment & Insurance Solutions) |
The Bombay Chartered Accountants
Society has requested the Finance Minister, Arun Jaitley to scrapping the
Income Computation and Disclosure Standards (ICDS) – Sec. 145(2) of the
Income-tax Act, 1961 [the Act]. The basic thrust of the 10 ICDS notified by the
CBDT appears to be to prepone taxation of various items. The age old concept of
taxing real income and commercial profit has been ignored. BCAS has launched a
petition under change.org to urge that the ICDS should not just be deferred but
should be withdrawn completely.
Sec. 145(2) authorises the Central
Government to notify Income Computation and Disclosure Standards [ICDS] for the
purposes of computation of income. CBDT has notified 10 amended ICDS vide
notification dated 29th September, 2016 applicable to assessment year 2017-18
and subsequent assessment years, to be followed by all assessees (other than an
individual or a HUF who is not required to get his accounts of the previous
year audited in accordance with the provisions of section 44AB of the Act)
following the mercantile system of accounting, for the purposes of computation
of income chargeable to income-tax under the head “Profits and gains of
business or profession” or “Income from other sources”. The Total Investment
& Insurance Solutions
The impact of ICDS can be enumerated
as below:
• The amended Form 3CD requires a
tax auditor to certify the adjustments to be made to the profit and loss in
accordance with the provisions of ICDS. This will result in substantial work
for most businesses and may even result in the requirement of parallel MIS, one
for the purposes of regular accounts, and the other for the purposes of ICDS.
• Taxpayers are already grappling
with regulatory changes of the Companies Act, 2013, Ind-AS and the proposed
GST. Industry should be allowed more time to deal with another change of this
nature. The
Total Investment & Insurance Solutions
• It is strongly felt that the
revenue department has introduced section 145(2) and the ICDS, to reverse the
impact of some of the decisions of the Supreme Court and various high courts,
which were rendered in favour of the assessees. In the revenue’s zeal to take
some corrective action, in respect of some perceived advantage taken by few
assessees, a huge unproductive compliance burden without any substantial
benefit to exchequer has been imposed on the business community, which is
certainly not helping in improving the image of India as a favourable
investment destination. The Total Investment & Insurance Solutions
• ICDS is bound to create
uncertainty and deterrence in the conduct of business in India and also
militates against the professed policy of the Government to simplify the
taxation system.
• Taxpayers would be required to
keep and maintain dual set of books of account to comply with the requirement
of ICDS and /or will have to spend considerable amount of time, energy and man
hours in preparing and reconciling income as per ICDS and the one computed as
per books of accounts maintained as per the applicable AS.
• There is bound to be a lot of
controversy in interpretation of the ICDS and this will merely lead to enhanced
litigation.
• Since some of the differences in
accounting as per Ind AS/ ICDS would only be timing difference, it will lead to
undue litigation without any corresponding benefit to the Revenue in long term. The Total Investment
& Insurance Solutions
In the event section 145(2) is not
deleted and the notified ICDS are not withdrawn, the implementation thereof
will create onerous burden on the assessees for compliance and will increase
the paper work manifold without any substantial advantage to the Revenue. The
above provision is clearly against the declared policy of the government of
minimum government and maximum governance. The Total Investment & Insurance
Solutions
In fact, even the Income-Tax
Simplification Committee, set up by Ministry of Finance and chaired by Justice
R. V. Easwar (Retd.) in its report containing first batch of recommendations
has rightly observed w.r.t. ICDS and has said that “ICDS deals only with the
method of accounting and at best it brings timing difference on recognition of
expenditure or income as compared to the books of account. The Committee
therefore feels that a fuller study of the implications of the ICDS is
necessary before it is implemented.”
At this very critical stage of the
national economy when there is an urgent need for ensuring the ease of doing
business in India and reducing all possible complexities and consequential
legal disputes, on account of the following reasons, the petition urges that the
ICDS should not just be deferred but should be withdrawn completely.The Total Investment
& Insurance Solutions
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