July 08 2020
Angel tax: CBDT, DPIIT trade blame for delay in resolving issue
21 March 2019

Can’t use data in PDF form, says CBDT

In an escalating back-and-forth between the Central Board of Direct Taxes and the Department for Promotion of Industry and Internal Trade over the infrastructural roadblocks to finding a solution to the angel tax issue, both bodies have passed the buck to the other in order to resolve the problem.

Last month, the DPIIT had issued a notification stating that registered start-ups would be exempt from the angel tax if they met certain conditions.

The Department was to send the names of such start-ups to the CBDT, which was to then incorporate them into its systems, so that such companies would be exempt from angel tax proceedings at the outset.

Last week, The Hindu had reported that the CBDT had not yet set up the infrastructure needed to automatically remove registered start-ups from angel tax scrutiny, about a month after a notification was issued to this effect.

It is now learnt, from officials in the Finance Ministry, that the CBDT has passed the buck for this lapse onto the DPIIT, complaining that the Department was sending the names of the exempted start-ups in PDF form.

Tech shortcomings

The CBDT does not have a method to extract the required information from PDF files and so, it is being done manually, the officials said, adding that their system was ready to extract the data if sent in ‘digital’ form.

The DPIIT, for its part, has said that its own technological shortcomings, especially to do with digital signatures, is the reason why it is sending PDFs. The Department does not have the facility for the start-ups to provide a digital signature, except in PDF form. It would take months and a certain expense to get this facility, an official in the DPIIT said.

The DPIIT official added that an expedited solution for this would be for the digital signature authentication process be done by the CBDT itself, which already has the facility.

In such a scenario, a start-up registers with the DPIIT, which then sends this data in a digital, easily accessible form to the CBDT, which would then send the start-up a link to sign digitally and authenticate itself.

Once this is done, the CBDT would be able to mark such firms as exempt from angel tax scrutiny, at the source itself, the official said.

Another issue raised by start-ups is the acknowledgement mail sent by the CBDT confirming the angel tax exemption of that start-up being a single-line email, which was not enough proof of exemption to show the assessing officer when he came for scrutiny.

Sachin Taparia, founder and chairman, LocalCircles, which is representing the start-up community in this regard, said. “CBDT has agreed to enhance the acknowledgement.”



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