Changes in Form 3CD for Assessment year 2016-2017

The Central Board of Direct Taxes has reported Income-tax (7th amendment) Rules, 2014 that replaces the current Form No. 3CD with a changed a new form. This new Form 3CD proposes few new clauses and replaces some present clauses with the newest ones. This new form would need the tax auditor for furnishing more details and information in this newer format of tax audit report.

Contrasting the older form 3CD which needed the auditor for reporting only those prohibited payments that were expensed in Profit and loss account, this newer Form 3CD need a recording of all the payments which are disallowed even in cases where they have not been debited to the profit and loss account.

The Central Board of Direct Taxes has also with immediate withdrawn the E-filing utility for form 3CA 3CD in old format

With the replacement of Form No. 3CD, it would require more time for reporting. Some of the additional requirements of the new format

• Assessees who are liable for paying indirect taxes such as service tax, excise duty, customs duty, sales tax, etc. are required to furnish the registration number or another identification number which is allotted to them [clause 4 of Part A].
• The applicable clauses of section 44AB would be reported under which the audit was conducted [clause 8 of Part A].
• The new form requires relevant details with respect to the address of the place where the books of account of the assessee have been kept [clause 11(b) of Part B].
• The auditor requires specifying the nature of documents that is examined during the tax audit [clause 11(c) of Part B].
• Also, a tabular format is provided to report financial bearing due to changes in the accounting methodology and stock valuation methods [clause 13 and clause 14 of Part B].
• The new format requires the details of land or building which is transferred by assessee for an amount which is lesser with respect to the stamp duty value (under section 43CA or under section 50C)
• All the deductions which are permissible under sections 32AC, 35AD, 35CCC and 35DDD must be reported in new Form No. 3CD[clause 19 of Part B].
• The newer Form needs reporting of the below mentioned non-permissible payments, even in cases where they are not expensed in profit and loss account[clause 21 of Part B]:
  • TDS disallowed due to default under section 40(a)
  • Disallowed cash payments under section 40A(3)
  • Disallowed gratuity provisions under section 40A(7)
  • Disallowance under Section 40A(9)
  • Any contingent liability
  • Amounts which are inadmissible under section 14A
  • Any inadmissible interest
• As per section 32AC of the Act, there is an allowance of 15 percent for any investment on plant and machinery. The newer form requires reporting of deemed income that arises out of any transfer or sale of new asset within a 5 year period calculated from the day of the installation [clause 24 of Part B].
• A new clause has also been inserted in the new Form that necessitates reporting all the shares which are unlisted and that assessed received without consideration or for inadequate consideration as per section 56(2)(viia)[clause 28 of Part B].
• A new clause has also been inserted in the new Form that necessitates reporting of all the transactions relating to the issue of shares where the assessee has received consideration which has exceeded the fair market value as per section 56(2)(viib)[clause 29 of Part B].
• The new Form also requires reporting of any losses with respect to speculation business as provided in Section 73[clause 32(c) of Part B].
• Assessee is also required to furnish all the details with respect to losses which is incurred by him as provided in Section 73A
• In case any assessee has claimed any deduction under Sections 10A and 10AA then the same has to be reported in this new Form
• This new format needs reporting with respect to compliance related to TCS provisions too [clause 34(a) of Part B].
• The tax auditor must report regarding the compliance of assessee in furnishing TCS or TDS statement within given time [clause 34(b) of Part B].
• In case the assessee is deemed to be an assessee-in-default and hence is required to pay the interest under Section 201(1A) or 206C(7), he should provide the TAN of the assessee, interest actually paid and interest payable[clause 34(c) of Part B].