Sections 115K to 115N
Circular No. 641 was issued by the Central Board of Direct Taxes on 9 December 1992. Its subject is Sections 115K to 115N.
This is a clarification. The Board is stating how it reads a provision. That reading binds the department; it does not bind a court, and where the section says otherwise the section wins.
Answers questions on the simplified scheme for small businessmen in the new Chapter XII-C, sections 115K to 115N, inserted by the Finance Act, 1992. 'Vocation' covers tailoring, hair-cutting, washing clothes, typing, photocopying, repair work and similar services requiring no substantial intellectual input, so carpenters, electricians, plumbers, painters, welders, lathe operators and taxi drivers are in and lawyers, accountants, consultants, engineers, architects and teachers are out. Tax is paid at bank counters with a statement-cum-challan, Form No. 4A for individuals and ordinary Hindu undivided families and Form No. 4B for a family with a member having taxable income of his own, and no visit to the Income-tax Office is needed. A survey team that finds tax paid under the scheme will ask no further question about the declared business or vocation, and the Department will not open earlier years or enquire into the source of capital merely because the statement was filed. The scheme is confined to individuals and Hindu undivided families with turnover up to Rs. 5,00,000 and income up to Rs. 35,000, whose income from any other source does not exceed Rs. 5,000 computed before the section 80L deduction, and it is experimental, running initially for two assessment years, 1993-94 and 1994-95.
The Board issued comments and clarifications on questions and doubts raised about the new simplified procedure for payment of tax by small businessmen.
| Under the 1961 Act | Now |
|---|---|
| s.80L | no counterpart recorded |
| s.115K | no counterpart recorded |
SECTIONS 115K TO 115N
Special provisions relating to retail trade, etc.
SECTIONS 115K TO 115N l SPECIAL PROVISIONS RELATING TO RETAIL TRADE, CERTAIN VOCATIONS, ETC.
744. Certain clarifications regarding the new simplified procedure for small businessmen
The Finance Act, 1992 has inserted a new Chapter XII-C in the Income-tax Act, which provides for a simplified scheme for payment of income-tax by small businessman. Comments or clarifications on some questions and doubts are mentioned below :—
1. What is meant by the term "vocation"?
Vocation has been defined to include tailoring, hair-cutting, washing clothes, typing, photocopying, repair work of any kind and other services of a similar nature. Other services of a similar nature would include vocations which are of the same genus as the ones mentioned in the definition, that is to say, vocations which do not require any substantial intellectual input. Illustrations of this would be persons earning their livelihood as carpenters, electricians, plumbers, painters, welders, lathe machine operators, taxi drivers, etc. The simplified procedure will, thus, not be available to professionals like lawyers, accountants, consultants, engineers, architects, teachers, etc.
2. What is the statement which is required to be filed?
The statement-cum-challan required to be filed is Form No. 4A for individuals and ordinary HUFs and Form No. 4B for HUFs having at least one member with taxable income of his own.
3. Where will the forms be available?
The forms will be available at bank counters. Forms will also be sent to the local associations of small businessmen. Forms advertised in the newspapers can also be photocopied and filed in duplicate. Payment of tax has to be made at the bank counters. There is no need to go to the Income-tax Office for this purpose.
4. What happens if a survey team goes to a business premises and the owner of the premises shows evidence of payment of tax under the simplified procedure?
When a survey team comes across a taxpayer who has paid tax under the simplified procedure, the survey team will not ask any further question regarding the business or vocation declared in Form No. 4A/4B.
5. Why have survey at all once the new scheme has been announced?
Survey operations are intended to obtain information regarding all kinds of assessees irrespective of nature of income and turnover. The present scheme is, however, restricted only to individuals and HUFs having income from retail trade, eating house or from a vocation. It is also limited in terms of level of income and turnover. As stated above the survey team will not ask any further questions regarding the business or vocation declared in Form 4A or 4B.
6. Why is this scheme limited to two assessment years only?
The scheme is experimental and is initially operative for two years. Looking at the response and the success of the scheme, the Government may consider extension of this scheme.
7. What is meant by "not assessed to income-tax for any assessment year, commencing on or before 1-4-1992"?
The scope of the expression "not assessed to income-tax for any assessment year, commencing on or before 1-4-1992" covers all persons who have not filed returns so far although they have taxable income.
8. How is the income from any source other than the business or vocation computed?
The persons opting for the scheme should not have income exceeding Rs. 5,000 from any source other than the business or vocation. He may, for instance, have income from interest, house property, dividend, salary, etc. This, in the aggregate, should not exceed Rs. 5,000 even before making any deduction under section 80L. From this aggregate amount, a deduction under section 80L will be allowed.
9. Will the department try to ascertain whether the taxpayer had taxable income for the preceding assessment years?
The department will not take any action to initiate any proceedings for any earlier years merely because the assessee has filed a statement-cum-challan under the new scheme. In all cases where the assessee filing the statement in Form No. 4A/4B is actually carrying on the business or vocation mentioned in the scheme, no enquiry will be carried out.
10. Once a person files Form No. 4A/4B and pays the tax for 1993-94 and 1994-95, will the department make enquiry regarding source of capital employed in the business/vocation for these two years?
..................... No.
11. Will the department make such enquiry for years prior to or subsequent to these two years?
No such enquiry will be made. The scheme is applicable to persons who are genuinely engaged in small business or vocation and whose turnover does not exceed Rs. 5 lakhs and income does not exceed Rs. 35,000. It is not expected that such people will be persons with much capital. It must be remembered that this scheme is intended to help small taxpayers who have not hitherto been assessed and save them the bother of contacting the Income-tax Office. It is not intended for persons who indulge in creating cases of capital build-up.
12. Section 115N seems to bar other proceedings only in respect of "income from retail trade". What about income from an eating place or from a vocation?
The protection given by section 115N applies to all persons who file the statements in Form No. 4A/4B under the provisions of section 115K.
13. Should a person, who files Form No. 4A/4B, apply for a Permanent Account Number under section 139A?
No, he need not.
Circular: No. 641, dated 9-12-1992.
On an old survey or reopening where a small trader produces a Form No. 4A statement-cum-challan for 1993-94 or 1994-95.
Forms it names. Form No. 4A, Form No. 4B
Source: the Income Tax Department’s own published text — its page for this instrument.