CBDT reframes circular for disallowance of “other sums chargeable” U/s 40(a)(i)

In a recent briefing done by CBDT alongside a letter addressed to all the Principal Chief Commissioner of Income Tax and Principal Director General of Income Tax, the board has drawn attention to its Circular No 3/2015 dated 12.2.2015, and requested the officers of the Income Tax department including those who are representing the department in litigation cases before ITAT/Courts etc. to follow the circular thoroughly as instruction are provided in that in written format.

The above mentioned Circular was solely subjected on the disallowance of “other sums chargeable” under Section 40(a)(i) of the Income-tax Act, 1961. and it was clearly clarified that the purpose of making such disallowance, in the cases of non-resident individuals, the appropriate portion of the sum chargeable distinct to be levied as tax under the Act, which is the actual component to be regarded as income therein, shall form the basis of such disallowance.

The board has been noticed by various forums that the Circular has not been kept in view properly while filing further appeals for any arguments and while putting up concluding decisions to such relevant cases by superlative authorities like administrative Commissioners & Commissioners (Appeal). Furthermore, in the letter, it was also briefed that, the Circular has not been closely kept in view by the representatives of the department in those of the ongoing cases related to litigation issues. Moreover, it is also hinted that these representatives still regard that the disallowance should be established on the gross amount of offshore payments, like purchases, in spite of what is mentioned in the circular.

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Therefore, in its quest to notify the corrections clearly and to instruct all the officers of the department and those who are representing the department in litigation disputes before ITAT or, Courts etc, CBDT has directed them to adhere to the content of this circular with utmost attention.