The Ministry of Corporate Affairs (MCA) has put an announcement that the new lease accounting standard, Ind AS 116 will get implemented from 1^st April 2019. The new Standard, globally implemented in several countries from 1^st Jan 2019, is called IFRS 16. The Standard eliminates the 6-decade old distinction between financial and operating leases, from lessee accounting perspective, thereby putting all leases on the balance sheet. Ind AS 116 introduces a single lease accounting model and requires a lessee to recognize assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value.

Assessment of whether an arrangement is, or contains, a lease, will be one of the biggest practical issues when applying the new standard. Under the new standard, a lease is a contract, or part of a contract, that conveys the right to use an asset (underlying asset) for a period of time in exchange for consideration. To be a lease, a contract must convey the right to control the use of an identified asset, which could be physically distinct portion of an asset such a floor of a building. A contract conveys the right to control the use of an identified asset if, throughout the period of use, the customer has the right to obtain substantially all of the economic benefit from the use of the identified asset and direct the use of identified asset.

Read more: Transforming the way of Accounting for Leases – Ind AS 116

Chapter XXII of the Income Tax Act, 1961 (‘Act’) provides for offences and initiation of prosecution for non-compliance of the provisions of the Act. Section 279 of the Act provides for initiation of prosecution for the offence specified there in. This section requires previous sanction of Principal Commissioner or Commissioner or Commissioner (Appeals) or appropriate authority[1]. 

Section 279(2) provides that any offence under this chapter may either before or after institution of proceedings be compounded by Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General. (authority competent to compound an offence).

Explanation to Section 279(3) provides for power of Central Board of Direct Tax (CBDT) to issue orders, instructions or directions under the Act shall include and shall be deemed include the power to issue instructions or directions obtain previous approval of CBDT to other income-tax authorities for the proper composition of offences under this section.

CBDT issued guidelines[2] on 14^th June 19 in suppression of earlier guidelines pertaining to compounding of offences including the guidelines of CBDT dated 23^rd December 14. The new guidelines shall be effective from 17^th June 19. All the applications received for compounding after the said date shall comply with new guidelines.

Read more: Compounding Under Income Tax Act, 1961- Latest Guidelines

The recent decision[1] of Supreme Court which has upheld the decision of Telangana & Andhra Pradesh High Court in the matter of PV Ramana Reddy & Others v. Union of India & Others[2], wherein the High Court has held that arrest under goods & services tax laws (GST laws) is not dependent on the assessment, gives power to the authorities to tackle more efficiently with the economic frauds. In other world, the said judgment also gives power to authorities to intimidate genuine taxpayers and subject them to arrest. Hence, either appropriate changes to the legislation are to be done or instructions shall be laid by Central Board of Indirect Taxes & Customs (CBIC) when it comes for implementing the arrest provisions to see that genuine taxpayers are not harassed or subjected to intimidation and personal liberties are safeguarded.

In this article, we shall deal with certain issues pertaining to arrest and related by examining various judgments of different High Courts.

Read more: Interesting Issues in Arrest and Interplay of GST laws, IPC and PMLA

Key Topics:

INCOME TAX

• ACCELERATED ASSESSMENT

FEMA

• DEPOSITS ACCOUNTS OF PERSONS RESIDENT OF INDIA