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Direct taxes updates- Circulars, Press Releases and Notifications

(Sept, 2018)

V.K.Subramani

vks111164@gmail.com,

1. Filing of appeals- amendment in para 10 of Circular No.3/2018 dated 11.7.2018:

In letter [F.NO.279/MISC.142/2007-ITJ (PT)], dated 20-8-2018 the CBDT took note of the above Circular and amended Para 10 of the Circular No. 3 of 2018 dated 11.07.2018 as under:

"10. Adverse judgments relating to the following issues should be contested on merits notwithstanding that the tax effect entailed is less than the monetary limits specified in para 3 above or there is no tax effect:

2. Certificate for no deduction, lower deduction of tax at source:

The CBDT in Circular [F.NO.370142/10/2018-TPL], dated 17-8-2018 has taken some measures for rationalization of rules for issue of TDS/TCS certificates with non-deduction or lower deduction /collection of tax at source. Section 197 of the Income-tax Act, 1961 ('the Act') contains provisions enabling the Assessing Officer ('AO') to give the assessee a certificate for deduction of income-tax at any lower rates or no deduction of income-tax, if he is satisfied, upon an application made by the assessee in this behalf, that the total income of the recipient justifies no deduction or deduction at lower rates. Similarly, sub-sections section 206C of the Act contain provisions enabling the AO to give a certificate for collection at lower rate if he is satisfied and upon an application made by the assessee in this behalf. Further, rules 28, 28AA & 28AB, 37G & 37H and Form No. 13 have been inserted in the Income-tax Rules, 1962 ('the Rules') to specify the form and manner in which the application for grant of the certificate for lower rate of deduction or collection or no deduction may be made. It is felt that the existing Form No. 13 and relevant rules are required to be rationalised. Hence, in order to rationalise and make the process of issuance of certificate for no deduction of tax or deduction/collection of tax at lower rate electronic, the existing Form No.13 and relevant rules are required to be amended. Accordingly, certain amendments in Form No. 13, and rules 28, 28AA, 28AB, 37G and 37H of the Income-tax Rules, 1962 are proposed.

3. Deferment of clause 30C (GAAR) and 44 (GST) OF FORM NO. 3CD:

The CBDT in Circular No.6/2018 dated 17-8-2018 has decided that reporting under the proposed clause 30C and proposed clause 44 of the Tax Audit Report shall be kept in abeyance till 31st March, 2019. Therefore, for Tax Audit Reports to be furnished on or after 20th August, 2018 but before 1st April, 2019, the tax auditors will not be required to furnish details called for under the said clause 30C and clause 44 of the Tax Audit Report.

4. Section 270AA read with section 271(1)(c) under reporting and misreporting of income- clarification on immunity provided under section 270AA:

In Circular No.5/2018, dated 16-8-2018 the CBDT has clarified that where an assessee makes an application seeking immunity under section 270AA of the Act, it shall not preclude such assessee from contesting the same issue in any earlier assessment year. Further, the Income-tax Authority, shall not take an adverse view in the proceedings for penalty under section 271(1)(c) of the Act in earlier assessment years merely on the ground that the assessee has acquiesced on the issue in any later assessment year by preferring an immunity on such issue under section 270AA of the Act.

5. Computation of admissible deduction under section 10A:

The CBDT in Circular No.4/2018, dated 14-8-2018 took note of the apex court decision in CIT v HCL Technologies Ltd. [2013] 93 taxmann.com 33 (SC) and clarified that freight, telecommunication charges and insurance expenses are to be excluded both from "export turnover" and "total turnover', while working out deduction admissible under section 10A of the Act to the extent they are attributable to the delivery of articles or things or computer software outside India. Similarly, expenses incurred in foreign exchange for providing the technical services outside India are to be excluded from both "export turnover" and "total turnover" while computing deduction admissible under section 10A of the Act. Thus, all charges/expenses specified in Explanation 2(iv) to section 10A of the Act, are liable to be excluded from total turnover also for the purpose of computation of deduction u/s 10A of the Act.Accordingly, henceforth, appeals may not be filed by the Department on the above settled issue, and those already filed may be withdrawn/not pressed upon.

Direct taxes updates- Circulars, Press Releases and Notifications - August 2018

CA. V. K. Subramani, Erode

vks111164@gmail.com,

1. Stakeholders’ view sought on Significant Economic Presence (SEP): In letter [F.NO.370142/11/2018-TPL], dated 13-7-2018 the Government has sought stakeholders view as regards, Significant Economic Presence (SEP). As per the allocation of taxing rules under Article 7 of Double Taxation Avoidance Agreements, business profit of an enterprise is taxable in the country in which the taxpayer is a resident. However, if an enterprise carries on its business in another country through a 'Permanent Establishment' situated therein, such other country may also tax the business profits attributable to the 'Permanent Establishment'. For this purpose, 'Permanent Establishment' means a 'fixed place of business' through which the business of an enterprise is wholly or partly carried out provided that the business activities are not of preparatory or auxiliary in nature and such business activities are not carried out by a dependent agent. For a long time, nexus based on physical presence was used as a proxy to regular economic allegiance of a non-resident. However, with the advancement in information and communication technology in the last few decades, new business models operating remotely through digital medium have emerged. Under these new business models, the non-resident enterprises can carry on business and interact with customers in another country without having any physical presence in that country resulting in avoidance of taxation in the source country. Therefore, the existing nexus rule based on physical presence no longer holds good for taxation of business profits in source country. As a result, the rights of the source country to tax business profits that are derived from its economy are unfairly and unreasonably eroded.In view of the above, Finance Act, 2018 introduced the concept of 'Significant Economic Presence' (SEP) in the Income-tax Act, 1961 ('the Act') for taxation of non residents in India by amplifying the scope of the definition of "business connection" through Explanation 2A to section 9(1)(i) of the Act. The definition of 'business connection', was clarified to provide that a non-resident's significant economic presence in India shall constitute "business connection" of the non-resident in India and the "significant economic presence" for this purpose shall mean—

It is further provided that the transactions or activities shall constitute significant economic presence in India, whether or not the agreement for such transactions or activities is entered into in India or the non-resident has a residence or place of business in India or renders services in India. Moreover, it is also provided that only so much of income as is attributable to the transactions or activities referred above shall be deemed to accrue or arise in India.

Accordingly, for the purpose of determining significant economic presence of a non resident in India, the threshold for the aggregate amount of payments arising from the specified transactions and for the number of users requires to be prescribed.In this regard, suggestions/comments of stakeholders and the general public are invited on the following:

Comments and suggestions may be sent electronically by 10th August, 2018 at the email address ustpl3@nic.in.

2. Monetary limits by Department before ITAT, High Courts and SLPs/Appeals before Supreme Court: In Circular No.3/2018 dated 11-7-2018 the CBDT has revised monetary limits for filing various appeals. Reference is invited to Board's Circular No. 21 of 2015 dated 10-12-2015 wherein monetary limits and other conditions for filing departmental appeals (in Income-tax matters) before Income Tax Appellate Tribunal, High Courts and SLPs/appeals before Supreme Court were specified.

In supersession of the above Circular, it has been decided by the Board that departmental appeals may be filed on merits before Income Tax Appellate Tribunal and High Courts and SLPs/appeals before Supreme Court keeping in view the monetary limits and conditions specified below.

Henceforth, appeals/SLPs shall not be filed in cases where the tax effect does not exceed the monetary limits given hereunder:

It is clarified that an appeal should not be filed merely because the tax effect in a case exceeds the monetary limits prescribed above. Filing of appeal in such cases is to be decided on merits of the case.

For this purpose, 'tax effect' means the difference between the tax on the total income assessed and the tax that would have been chargeable had such total income been reduced by the amount of income in respect of the issues against which appeal is intended to be filed (hereinafter referred to as 'disputed issues'). Further, 'tax effect' shall be tax including applicable surcharge and cess.However, the tax will not include any interest thereon, except where chargeability of interest itself is in dispute. In case the chargeability of interest is the issue under dispute, the amount of interest shall be the tax effect. In cases where returned loss is reduced or assessed as income, the tax effect would include notional tax on disputed additions. In case of penalty orders, the tax effect will mean quantum of penalty deleted or reduced in the order to be appealed against.

The Assessing Officer shall calculate the tax effect separately for every assessment year in respect of the disputed issues in the case of every assessee. If, in the case of an assessee, the disputed issues arise in more than one assessment year, appeal can be filed in respect of such assessment year or years in which the tax effect in respect of the disputed issues exceeds the monetary limit specified in para 3. No appeal shall be filed in respect of an assessment year or years in which the tax effect is less than the monetary limit specified in para 3. In other words, henceforth, appeals can be filed only with reference to the tax effect in the relevant assessment year. However, in case of a composite order of any High Court or appellate authority, which involves more than one assessment year and common issues in more than one assessment year, appeals shall be filed in respect of all such assessment years even if the tax effect is less than the prescribed monetary limits in any of the year(s), if it is decided to file appeal in respect of the year(s) in which tax effect exceeds the monetary limit prescribed. In case where a composite order/judgment involves more than one assessee, each assessee shall be dealt with separately.

Further, where income is computed under the provisions of section 115JB or section 115JC, for the purposes of determination of 'tax effect', tax on the total income assessed shall be computed as per the following formula-

(A — B) + (C — D)

where,

A = the total income assessed as per the provisions other than the provisions contained in section 115JB or section 115JC (herein called general provisions);

B = the total income that would have been chargeable had the total income assessed as per the general provisions been reduced by the amount of the disputed issues under general provisions;

C = the total income assessed as per the provisions contained in section 115JB or section 115JC;

D = the total income that would have been chargeable had the total income assessed as per the provisions contained in section 115JB or section H5JC was reduced by the amount of disputed issues under the said provisions:

However, where the amount of disputed issues is considered both under the provisions contained in section 115JB or section 115JC and under general provisions, such amount shall not be reduced from total income assessed while determining the amount under item.

In a case where appeal before a Tribunal or a Court is not filed only on account of the tax effect being less than the monetary limit specified above, the Pr. Commissioner of Income-tax/Commissioner of Income Tax shall specifically record that "even though the decision is not acceptable, appeal is not being filed only on the consideration that the tax effect is less than the monetary limit specified in this Circular". Further, in such cases, there will be no presumption that the Income-tax Department has acquiesced in the decision on the disputed issues. The Income-tax Department shall not be precluded from filing an appeal against the disputed issues in the case of the same assessee for any other assessment year, or in the case of any other assessee for the same or any other assessment year, if the tax effect exceeds the specified monetary limits.

In the past, a number of instances have come to the notice of the Board, whereby an assessee has claimed relief from the Tribunal or the Court only on the ground that the Department has implicitly accepted the decision of the Tribunal or Court in the case of the assessee for any other assessment year or in the case of any other assessee for the same or any other assessment year, by not filing an appeal on the same disputed issues. The Departmental representatives/counsels must make every effort to bring to the notice of the Tribunal or the Court that the appeal in such cases was not filed or not admitted only for the reason of the tax effect being less than the specified monetary limit and, therefore, no inference should be drawn that the decisions rendered therein were acceptable to the Department. Accordingly, they should impress upon the Tribunal or the Court that such cases do not have any precedent value and also bring to the notice of the Tribunal/Court the provisions of sub-section (4) of section 268A of the Income-tax Act, 1961 which read as under :

"(4) The Appellate Tribunal or Court, hearing such appeal or reference, shall have regard to the orders, instructions or directions issued under sub-section (1) and the circumstances under which such appeal or application for reference was filed or not filed in respect of any case."

As the evidence of not filing appeal due to this Circular may have to be produced in courts, the judicial folders in the office of Pr.CsIT/CsIT must be maintained in a systemic manner for easy retrieval.

Adverse judgments relating to the following issues should be contested on meritsnotwithstanding that the tax effect entailed is less than the monetary limits specified in para 3 above or there is no tax effect:

The monetary limits specified in para 3 above shall not apply to writ matters and Direct tax matters other than Income tax. Filing of appeals in other Direct tax matters shall continue to be governed by relevant provisions of statute and rules. Further, in cases where the tax effect is not quantifiable or not involved, such as the case of registration of trusts or institutions under section 12A/12AA of the IT Act, 1961 etc., filing of appeal shall not be governed by the limits specified in para 3 above and decision to file appeals in such cases may be taken on merits of a particular case.

It is clarified that the monetary limit of Rs. 20 lakhs for filing appeals before the ITAT would apply equally to cross objections under section 253(4) of the Act. Cross objections below this monetary limit, already filed, should be pursued for dismissal as withdrawn/not pressed. Filing of cross objections below the monetary limit may not be considered henceforth. Similarly, references to High Courts and SLPs/appeals before Supreme Court below the monetary limit of Rs. 50 lakhs and Rs.1 Crore respectively should be pursued for dismissal as withdrawn/not pressed. References before High Court and SLPs/appeals below these limits may not be considered henceforth.This Circular will apply to SLPs/appeals/cross objections/references to be filed henceforth in SC/HCs/Tribunal and it shall also apply retrospectively.

Direct taxes Circular Updates (July, 2018)

CA. V. K. Subramani, Erode vks111164@gmail.com,

1. Deduction of tax at source under the proviso to section 193 (iib): The Central Government vide Notification No 2938(E) and 2939 (E) has specified that capital gain bonds issued by Power Finance Corporation Ltd and Indian Railway Finance Corporation Ltd are eligible for the benefits of clause(iib) of the proviso to section 193 in the case of transfer of such bonds by endorsement or delivery, only if the transferee informs Power Finance Corporation Ltd or Indian Railway Finance Corporation Ltd as the case may be, by registered post within a period of sixty days of such transfer.

2. Notification of cost inflation index for Financial Year 2018-19: The Central Government vide Notification No 2413 dated 13.06.2018 has notified the cost inflation index for the financial year 2018-19 as 280.

3. Amendment proposed in rule 10C in respect of computation of interest income pursuant to secondary adjustment under section 92CE: In the Press Release dated 20.6.2018, the CBDT has issued draft of income tax rule amendments proposed and has invited comments and suggestions from stakeholders and general public. Under Rule 10CB(1), a uniform time limit of 90 days, starting from different dates, is prescribed for repatriation of excess money. This is done in order to provide for uniform treatment in respect of the different types/situations of primary adjustments specified under sub-section (1) of section 92CE.Certain difficulties have been noted in implementing the provisions of Rule 10CB(1) in respect of primary adjustment that arises on account of Agreement for Advance Pricing (APA) entered into by the assessee, or on account of an agreement reached under the Mutual Agreement Procedure (MAP). In order to remove these difficulties, it is proposed to amend Rule 10CB. The draft notification providing for said modification has been framed and uploaded on the website of the Income Tax Department www.incometaxindia.gov.in for comments from stakeholders and general public.

The draft notification of the rules proposes to substitute clause (iii) and (v) to rule 10 CB. Clause (iii) which provides time limit of 90 days from the due date of filing the return of income under section 139(1) in the case of agreement for advance pricing agreement entered into by the assessee under section 92CD by prescribing the time limit of 90 days from the date on which the advance pricing agreement has been entered into by the assessee under section 92CC, where the primary adjustment to transfer price is determined by such agreement. Similarly, it proposes to substitute clause (v) which presently provides for 90 days from the due date of filing the return under section 139(1) in the case of agreement made under mutual agreement procedure under a DTAA entered into under section 90 or 90A by giving the new time limit of 90 days from the date of giving effect by the Assessing Officer under Rule 44H to the resolution arrived at under mutual agreement procedure, where the primary adjustment to transfer price is determined by such resolution, under a DTAA entered into under section 90 or 90A.

4. Prompt investigation in fresh series of cases pertaining to Panama papers: The CBDT in press release dated 21.06.2018 has updated the various stakeholders about Panama papers. The fresh release made in the media today under 'Panama Paper Leaks' is being promptly looked into by the law enforcement agencies under the aegis of the Multi Agency Group (MAG) already constituted for facilitating coordinated and speedy investigation. As per the standard operating procedures in place for investigating such cases, examining the information revealed in the media release with the disclosures made by the alleged persons in the annual returns of income filed, particularly in the foreign assets (FA) schedule, foreign remittance details etc. will be undertaken expeditiously, followed by raising of relevant queries. Subsequently, investigations in appropriate cases would be carried out to bring them to a logical conclusion.

The Panama Paper leaks were originally revealed by the International Consortium of Investigative Journalists (ICIJ), on 4^thApril 2016. On the same day, the Government constituted the MAG, headed by Chairman, Central Board of Direct Taxes (CBDT) as its convener, comprising representatives of the Income Tax Department, Enforcement Directorate (ED), Financial Intelligence Unit (FIU) and Reserve Bank of India (RBI).

The Panama Paper leaks involving 426 persons have been investigated by the Income Tax Department and other member agencies of MAG. Since the database released by ICIJ did not contain any financial details or details of beneficial ownership, these had to be sought from foreign jurisdictions under tax treaties in most cases. After thorough investigation, involving examination of the disclosures made in the ITRs particularly the FA schedule, residential status, responses to questionnaires issued, responses received from foreign jurisdictions and details of foreign remittances made, 352 cases were found to be non-actionable.

In the 74 cases found actionable, invasive actions were taken in 62 cases with searches conducted in 50 cases, and surveys in 12 cases leading to detection of undisclosed foreign investments of about Rs.1140 crore (approx). In 16 cases criminal prosecution complaints have been filed in jurisdictional courts which are at various stages of hearing. In 32 cases notices under section 10 of the Black Money Act have been issued.

The investigations conducted in Panama Paper cases reflect the Government's continued focus in dealing with Black Money stashed abroad. The promptness in action is more than evident as most of the actionable cases have been effectively addressed. Though the investigating agencies faced problems of incomplete data and absence of financial information as well as not very prompt cooperation from other countries, the overall outcome has been very satisfactory. Government would like to assure that the fresh series of Panama Papers information would also be effectively addressed within a reasonable time frame.

Direct taxes Circular Updates (June, 2018)

CA. V. K. Subramani, Erode

vks111164@gmail.com,

Direct taxes Circular Updates (January, 2018)

CA. V. K. Subramani, Erode

vks111164@gmail.com,

Direct Tax Updates (December, 2017)

CA. V. K. Subramani, Erode

vks111164@gmail.com

The matter was examined by the Board and it has been decided that the provisions of section 9(1)(i) of the Act read with Explanation 5 thereof shall not apply in respect of income accruing or arising to a non-resident on account of redemption or buyback of its share or interest held indirectly (i.e. through upstream entities registered or incorporated outside India) in the specified funds if such income accrues or arises from or in consequence of transfer of shares or securities held in India by the specified funds and such income is chargeable to tax in India. However, the above benefit shall be applicable only in those cases where the proceeds of redemption or buyback arising to the non-resident do not exceed the pro-rata share of the non-resident in the total consideration realized by the specified funds from the said transfer of shares or securities in India. It is further clarified that a non-resident investing directly in the specified funds shall continue to be taxed as per the extant provisions of the Act.

Direct Tax Updates (November, 2017)

CA. V. K. Subramani, Erode

vks111164@gmail.com,

Direct taxes Circular Updates (September, 2017)

CA. V. K. Subramani, Erode

vks111164@gmail.com,

(i) Marked to Market (MTM) gain /losses on fair value adjustments through profit and loss account (FVTPL) shall not require any adjustment under clause (i) of the Explanation 1 to section 115JB(2). However, provision for diminution / impairment in value of assets other than FVTPL would be liable for the adjustment.

(ii) The starting point for computing book profit for Ind AS compliant companies shall be profit before other comprehensive income (Item number XIII in Part 2 (Statement of Profit and Loss) of Division II of Schedule III to the Companies Act, 2013. It is not total comprehensive income (including other comprehensive income) [Item number XV in Part 2 (Statement of Profit and Loss) of Division II of Schedule III to the Companies Act, 2013].

(iii) For computation of Transition Amount in the first year of adoption of Ind AS, the companies would prepare Ind AS financial statement for reporting year with a comparative financial statement for immediately preceding year. As per Ind AS 101, a company would make all Ind AS adjustments on the opening date of the comparative financial year. For example, if a company adopts Ind AS from 01.04.2016 it is required to prepare financial statements for the year 2016-17 and also a opening balance sheet as on 01.04.2015 to restate the financial statements for the comparative period 2015-16. In such a case, the first time adoption adjustments as of 31st day of March 2016 should be considered [i.e. the start of business on 1st day of April 2016 (or, equivalently, close of business on 31st day of March 2016)] for computation of MAT liability for previous year 2016-17 (Assessment year 2017-18) and thereafter.

(iv) As per Indian GAAP, the proposed dividend would be recognized for the year to which it pertained though it is declared in the subsequent year and section 115JB provides for addback of such proposed dividend. As per Ind AS, proposed dividend would be recognized in the year in which it is declared instead of the year for which it relates to. Accordingly, the proposed dividend of F.Y.2015-16 will be reversed and credited to retained earnings. For computing MAT the adjustment of proposed dividend will not form part of the Transition Amount as it was adjusted already while computing MAT for F.Y. 2015-16.

(v) Though Ind AS could lead to adjustments on the transition date and corresponding impact on deferred taxes, such deferred tax adjustments recorded on the transition date shall be ignored for the purpose of computing Transition Amount.

(vi) The convergence date may include adjustment of the provision for bad and doubtful debts at the time of transition. Except adjustments relating to diminution in the value of assets, other adjustments shall not be considered. Hence, adjustment relating to provision for doubtful debts shall not be considered for the purpose computing the Transition Amount.

(vii) Share application money pending allotment reclassified as ‘other equity’ on the convergence date shall not be considered for the purpose of computing Transition Amount.

(viii) While computing MAT, the profit / Transition Amount shall be increased by dividend / interest on preference shares (including DDT) whether presented as dividend or interest.

(ix) Equity component of financial instruments like Non-Convertible debentures (NCDs), interest free loan etc included in ‘other equity’ as per Ind AS would be included in the Transition Amount.

(x) The book profit of the previous year in which the items of Property, Plant and Equipment (PPE) are retired, disposed, realized or transferred shall be increased or decreased, by the revaluation amount after adjustment of the depreciation on the revaluation amount relatable to such asset.

(xi) Adjustments on account of Service Concession arrangements would be included in the Transition Amount and also on an ongoing basis.

(xii) For the assessment year 2017-18, the deduction of lower of depreciation or losses shall be allowed as on 31st March, 2016. However, for the subsequent periods, the position as per books of account drawn as per Ind AS shall be considered for deducting lower of loss or unabsorbed depreciation.

(xiii) The capital reserves or share premium existing on the convergence date as per the erstwhile Indian GAAP which are reclassified as retained earnings / other reserves under Ind AS, shall not be considered for the purpose of Transition Amount. Further it is clarified that the amount of revaluation reserve even after such reclassifications shall continue to be considered as revaluation reserve for the purposes of computation of book profit and shall also include transfer to any other reserves by whatever name called or captialised.

(xiv) For a company following December ending will be required to prepare, accounts for MAT purposes under Indian GAAP for 9 months up to December 2016 and under Ind AS for 3 months thereafter. The Transition Amount will be calculated with reference to 1st January 2017. This is in view of the second proviso to section 115JB(2) of the Act, as companies will be required to follow Indian GAAP for pre-convergence period and Ind AS for the balance period.

Direct taxes Circular Updates (August, 2017)

CA. V. K. Subramani, Erode

vks111164@gmail.com,

Professional Updates- July 2017

Direct taxes Circular Updates (July, 2017)

CA. V. K. Subramani, Erode

vks111164@gmail.com,

Professional Updates- April 2017

Direct Taxes

Professional Updates- March 2017

Direct taxes Circular Updates

Guiding principles for determination of Place of Effective management (PoEM):

The CBDT in Circular No.6 /2017 has explained the principles for PoEM. It has prescribed that a company shall be said to be engaged in "active business outside India" if the passive income is not more than 50% of its total income; and (i) less than 50% of its total assets are situated in India; and (ii) less than 50% of total number of employees are situated in India or are resident in India; and (iii) the payroll expenses incurred on such employees is less than 50% of its total payroll expenditure.

Any determination of the PoEM will depend upon the facts and circumstances of a given case. The PoEM concept is one of substance over form. It may be noted that an entity may have more than one place of management, but it can have only one place of effective management at any point of time.

Since "residence" is to be determined for each year, PoEM will also be required to be determined on year to year basis. The process of determination of PoEM would be primarily based on the fact as to whether or not the company is engaged in active business outside India.

The place of effective management in case of a company engaged in ‘active business outside India’ shall be presumed to be outside India if the majority meetings of the board of directors of the company are held outside India. For the purpose of determining whether the company is engaged in active business outside India, the average of the data of the previous year and two years prior to that shall be taken into account. In case the company has been in existence for a shorter period, then data of such period shall be considered. Where the accounting year for tax purposes, in accordance with laws of country of incorporation of the company, is different from the previous year, then, data of the accounting year that ends during the relevant previous year and two accounting years preceding it shall be considered.

Some of the guiding principles which may be taken into account for determining the PoEM are as follows: (a) The location where a company's Board regularly meets and makes decisions may be the company's place of effective management provided, the Board - (i) retains and exercises its authority to govern the company; and (ii) does, in substance, make the key management and commercial decisions necessary for the conduct of the company's business as a whole. The CBDT has clarified in Circular No 8 /2017 dated 23.02.2017 that PoEM guidelines will not apply to a company whose turnover or gross receipt is Rs. 50 crore or less in a financial year.

Standard operating procedure for verification of cash transactions relating to demonetization:

In Instruction No.3 / 2017 dated 21.02.2017 the CBDT has given Standard Operating procedure viz. (i) Cases meeting the low risk criteria will be closed centrally. Cases which are not closed automatically will be pushed in batches to the AO for verification; (ii) the AO will be able to view each information record, information as submitted by the person under verification for each record and also capture the verification result. In case additional information is required, the AO will be able to send a request for additional information electronically. The person concerned will also be automatically informed about the request for additional information by e-mail and SMS. The information request will be visible to the person under verification with a hyperlink for uploading information. All the additional documents (including supporting evidence) are required to be submitted online; and (iii) the response filed by person under verification will be appraised against available information. The uploaded information can be downloaded by the Assessing Officer. In case explanation of source of cash is found justified, the verification will be closed by the AO electronically without any physical interface with the person concerned.