CBDT Consolidates Circulars For Ease Of Compliance Of StartUps

CBDT Consolidates Circulars For Ease Of Compliance Of StartUps


Taxmen shall not approach startups for any outstanding income tax demand unless it was confirmed by the appellate tribunal.

The Central Board of Direct Taxes (CBDT) had issued a consolidated circular reiterating clarification issued up to now on taxation concerns hurting startups, which includes the so-called angel tax.

No tax demand from startups sans appellate tribunal nod: CBDT 

In order to furnish a hassle-free tax environment towards the Start-ups, a series of announcements have been made by the Union Finance and Corporate Affairs Minister Nirmala Sitharaman in her General Budget Speech, 2019, and also on 23rd August 2019. So as to give effect to these announcements, the Central Board of Direct Taxes (CBDT) had issued many circulars in the matter from time to time. CBDT in a recent circular in August has consolidated all the circulars/clarifications issued on this matter for the ease of compliance of Start-up entities.

The present circular highlighted the following:-

Simplification of procedure of assessment of Start-ups: Circular No. CBDT on 7th of August, 2019 had issued a circular for the simplified process of assessment of Start-ups recognized by DPI. The circular covered matters under limited scrutiny, cases where multiple issues which include the issue of section 56(2)(viib) were involved or cases where Form No.2 was not filed through the Start-up entity. The detailed procedure of obtaining compulsory approval of the supervisory authorities for conducting inquiry has been also laid down by this circular.

The time limit for Completion of pending assessments of Start-ups: The time limit for completion of pending assessments has been also specified by CBDT. Every case involving limited scrutiny needs to be completed preferably by 30th September 2019, as well as the other cases of Start-ups, were to be disposed of on priority, if at all possible within 31st October 2019.

Process for addition made u/s 56(2)(viib) in the past assessment: CBDT clarification issued on 9th of August,2019, provided that the provisions of section 56(2)(viib) of the Act shall also not be applicable with regard to assessment made before 19th of February, 2019 if a recognized Start-up had filed declaration in Form No. 2. The timelines for disposal of appeals before CsIT (Appeals) has also been specified. Furthermore, the addition made under section 56(2)(viib) shall also not be pressed in further appeal.

Income-tax demand: It was reiterated time and again by CBDT that outstanding income-tax demand concerning to additions made under section 56(2)(viib) shall not be pursued and no communication relating to outstanding demand shall be made with the Start-up entity. Any other income-tax demand of the Start-ups shall not be pursued unless the demand has been confirmed by Income Tax Appellate Tribunal (ITAT).

Constitution of Start-up Cell: CBDT issued an order on 30th August 2019, which has constituted a Start-up Cell under the aegis of Member (Income Tax and Computerization), CBDT towards redressing grievances and towards addressing several tax-related concerns in the cases of Start-ups. CBDT had notified for setting up of a 5 member cell for startups in order to address their grievances relating to the angel tax and other tax issues. The cell shall be directed by the member (Income Tax and Computerization) of the Board.


eStartIndia Team

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