The government has provided certain relaxation in lockdown 4.0 but sectors that depend on human resources shall take time to recover. From small businesses to corporates, malls and cinemas, every segment is facing heat of this prolonged lockdown in the country due to the global pandemic.
The Finance Minister has announced certain relaxations in terms of reduced rate of interest for tax payments which are due for payment from 20-03-2020 to 29-06-2020 from 1.5% to 0.75% for every month or part thereof if it is paid on or before 30-06-2020. Further, in the press conference held on May 13, 2020, the Finance Minister has also reduced the rates of TDS/TCS in respect of specified payments/receipts by 25%.
In general, the tax deducted between April to February has to be deposited on or before 7th day of the next month and for March it has to be deposited by 30th April. The Finance Minister hasn’t provided any relief in the due date of tax payments. If the deductor fails to deposit tax at source, he shall be liable to pay interest at the rate of 1.5% for every month or part thereof on the amount of tax he failed to deposit to the credit of the Central Govt. The interest shall be calculated for the period starting from the date on which tax is deducted and ending on the date on which such tax is deposited.
Business organizations are struggling to meet their fixed costs and payment of salaries to employees. The unemployment has already started hitting hard, many people have already lost job with minimal notice and there had been unprecedented incidents of salary cuts & deferrals. There is hardly any business which is immune to the effects of the global coronavirus pandemic.
During this difficult time, sub-rule (3) of Rule 30 of Income-tax Rules, 1962, comes as a saviour for the taxpayers. It provides that the Assessing Officer may, in the special cases, with the prior approval of the Joint Commissioner permit quarterly payment of the TDS under four sections i.e. section 192 (Salary) or section 194A (Interest other than interest on Securities) or section 194D (Insurance commission) or section 194H (Commission and Brokerage). For first three quarters, TDS can be paid within 7 days from end of quarter and for fourth quarter it can be paid by 30th April.
Undoubtedly, salary is a fixed outflow for all the companies and if the benefit is allowed by Assessing Officer under Rule 30(3) for section 192, it will be a big relief for taxpayers. The banks are also facing liquidity challenge amid offering total of six months moratorium on loan EMIs starting from March 1, 2020, hence, they shall also feel relieved to an extent if they are allowed to make quarterly TDS payment on FDR interest under section 194A.
Taxpayers can apply to the Assessing officer to allow quarterly payment of TDS under Rule 30(3). Assessing officer can grant permission only with the previous approval of Joint commissioner and under Special Cases. Term ‘Special Cases’ has not been defined in the Income-tax Act or Rules. It has to be seen whether the current situation, due to Coronavirus pandemic, can be construed as a special case by the Assessing Officer to pass on the benefit of quarterly payment of TDS or not. Covid-19 is a global pandemic, and it has affected every business – big or small. This fact may play an important role while evaluating which case constitutes a special case or not.
The law has left it to the discretion of Assessing Officer to decide what situation shall be construed as a special case. It will be required to see the facts of each case and in the light of these facts, it can be seen that how the business of the assessee has been impacted and whether he is in position to make the payment of TDS or not. The Assessing officer may also take into consideration the liquidity position of the entity and its current liability. Based on this criterion, the Assessing Officer can conclude whether a particular case shall be construed as a special case to grant relief.
Since no form and manner has been prescribed for making such application, the assessee may file a general application on the letterhead (or without the letterhead due to the ongoing lockdown situation) specifying detailed facts of the case and why its case should be considered as ‘Special Case’ under Rule 30(3) for granting the benefit of quarterly payment of TDS. The assessee should make a proper evaluation of the liquidity position, turnover impact, recoveries from debtors, etc. and make a strong case before the Assessing Officer.
Due to the prevailing lockdown situation in the country resulting in restrictions, an application under Rule 30(3) may be sent over an email to the concerned officer and the Joint Commissioner. It may be digitally signed and in cases, where digital signatures are not possible, it may be sent from the email-ID of the Authorised Representative. Assessing officer, after considering the facts of the case and with the prior approval of Joint Commissioner, may permit the quarterly payment of TDS.
As no time limit has been prescribed by which such application has to be disposed of by the Assessing Officer, the application should be disposed off within a reasonable time. The courts have time and again held that if no time limit has been prescribed for any statutory provision, it should be disposed in reasonable time.
Accordingly, if the Assessing Officer grants permission to the applicant to deposit TDS on quarterly basis instead of monthly basis, the interest at the rate of 1.5% per month under section 201(1A) should not be levied if assessee fails to make the monthly payment of TDS but timelines prescribed under Rule 30(3) to make quarterly payment of TDS have been duly complied with.
Considering it as an economic crisis, the Prime Minister has already announced a package of Rs 20 lakh crore. It is impossible to know what will happen next in such uncertain times. Amidst such a scenario, it is challenging for taxpayers to pay their tax dues. Hence, one can hope that the tax department will be empathetic to the problems faced by taxpayers and a pragmatic view shall be taken to allow taxpayers to make quarterly payment of TDS under Rule 30(3).
