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Representation
Representation
3rd September, 2010
To,
Chairman,
Central Board of Direct
Taxes,
Government of India,
North Block, Vijay Chowk,
New Delhi-110001.
Dear Sir,
Subject
: Representation in respect of
Procedure for Registration of Digital Signature and uploading of Income-tax
Returns using Digital Signature
We refer to the amendment to
Rule 12 of the Income-tax Rules, 1962 (the Rules) which has made it mandatory
for all companies filing ITR-6 to digitally sign the I-T return for A.Y. 2010-11
and the Note regarding changes in the Procedure for Registration of Digital
Signature and uploading of Income-tax Returns using Digital Signature (The
Changed Procedure Note).
The Changed Procedure :
A. Para C of the Changed
Procedure Note recognises that in the following scenarios, taxpayers may find it
difficult to register the DSC as per the existing procedure as mentioned in the
aforesaid Note :
1. “Non-resident companies
where the Directors are foreign nationals.
2. Companies where the I-T
return is being filed for the first time.
3. Companies where the
Managing Director has changed and other Directors are either unavailable or
also have changed.
In all such cases it is
difficult to verify the identity of the person and his relationship with the
Entity for which he is the authorised signatory. With a view to make
registration simpler in such cases, the procedure has been changed to enable
registration of a DSC where the PAN is also provided in the DSC as per the
latest Interoperability guidelines issued by the Chief Controller of
Certifying Authorities. Such DSCs with encrypted value of PAN are now
available in the market.”
B. Para D of the Changed
Procedure Note prescribes the changes in the process of Registration of DSC on
the e-filing website. In this scenario, the Authorised Signatory has been given
the following options :
1. To select the existing
procedure to register the DSC, in case the scenarios mentioned in sub-para 1,
2, or 3 in para C of the Note, as reproduced above, are not applicable; or
2. “To select the new
procedure as given below :
(a) The Authorised
Signatory must use a fresh DSC having encrypted value of his PAN, as issued
by Certifying Authorities with effect from 1-8-2010.
(b) Enter Authorised
Signatory’s PAN number while registering the DSC. The same person must also
enter the same PAN in the Verification portion of the I-T Return which he is
signing in his capacity as Director/ Partner/Karta/Authorised Signatory.
(c) If the Authorised
Signatory’s PAN number matches the encrypted value of the PAN present in the
DSC — then the DSC will be registered after selecting the appropriate type
of DSC (.pfx or USB token) and clicking on ‘Select Your .pfx File
Certificate’.
(d) In case an
Individual is registering his DSC for submitting own ITR (ITRs 1-4 case)
then his PAN as per his login should match the encrypted PAN contained in
the DSC — then the DSC will be registered after selecting the appropriate
type of DSC (.pfx or USB token) and clicking on ‘Select Your .PFX File
Certificate’.
(e) Now, the I-T Return
for the Self/Company/Firm/Entity PAN can be signed using this registered
DSC.”
The implications of the Changed
Procedure :
C. As mentioned in para
B.2.a above, as per the new procedure, the Authorised Signatory must use a fresh
DSC having encrypted value of his PAN.
D. The relevant portion of
the Rule 114C of the Rules provides as under :
“Class or classes of
persons to whom provisions of S. 139A shall not apply 114C.
(1) The provisions of S. 139A shall not apply to following class or
classes of persons, namely :
(a)
(b) the non-residents
referred to in clause (30) of S. 2;”
E. Accordingly, as per the
explicit provisions of Rule 114C(1)(b), provisions of S. 139A do not apply in
case of non-residents.
F. However, in order to sign
the return with Digital Signature and upload the Return of Income in Form ITR-6,
the non-resident directors of the foreign companies would be compelled to obtain
the PAN in India and after obtaining the PAN would have to obtain a fresh DSC
having encrypted value of their PAN and then only they would be able to
digitally sign and upload the Returns of Income in Form ITR-6 for the A.Y.
2010-11.
G. Thus, effectively, in
case of non-residents, though the Rules do not require them to have a PAN in
India, the same has been made mandatory indirectly by the Changed Procedure
Note, particularly in case of foreign companies.
Practical difficulties :
H. It is irrational and
unlawful to insist upon a large number of directors of foreign companies to have
PAN in order to enable them to obtain DSCs having encrypted value of their PAN,
in order to enable them to sign the return of income of their companies.
I. Most of the Directors signing the Returns of Income of the Companies, would have no connec-tion with India and also have no income at all in India and yet they would be forced to obtain the PAN in India, merely for the purposes of signing the Return of Income of the companies of which they are directors.
J. The documentary requirements and procedure for obtaining PAN, particularly the requirement of Consularisation of the proof of identity and proof of address in case of foreign citizens which takes a lot of time, cost and effort, would cause undue hardship and anguish among many non-resident directors and foreign companies, particularly in view of the fact that PAN is NOT required as per the explicit provision contained in Rule 114C.
K. We understand that the Consularisation process in many cases takes about a month’s time. In that event it would be very difficult or nearly impossible for many directors of foreign companies to obtain their PAN before 30-9-2010 and then to obtain their DSCs having the encrypted value of their PAN. This would result into unnecessary and unavoidable delay in filing the Returns of the foreign companies, due for filing on or before 30-9-2010 for ITAY 2010-11. Further in case of loss return, the company may lose the benefit of carry forward of loss if the return is not filed in time.
L. Answer to Q 5 of the FAQs attached with the aforesaid Changed Procedure Note, provides that the Power of Attorney (PoA) holder is authorised to sign ITR of foreign company as per S. 140 of Income-tax Act, 1961. The PoA holder can register his DSC having encrypted value of his PAN against the foreign company PAN as per the new procedure.
M. However, it is to be noted that in most cases the foreign companies are NOT comfortable or at ease, for various commercial and business consid-erations, to give PoA to third parties for signing the Return of Income with their digital signature. Conversely, an Indian resident may be unwilling to act as an authorised signatory of a foreign company and step into the shoes of such an assessee.
N. Further, practically, most of the private limited companies (which form a bulk of the thousands of companies that file tax returns in India) have been filing their e-returns for past few years without DSC. For all such companies, it would now be mandatory to obtain a PAN-encrypted DSC. The time available for such a large number of companies to do this is very short and this is likely to cause a serious problem in smooth filing of returns in the month of September.
Our request?:
P. In view of the above mentioned practical difficulties, we request you to amend the rules and make the digital signing of the Returns OPTIONAL particularly in case of non-resident/foreign companies.
O. Alternatively, the entire process of signing the Return Form ITR-6 with digital signature should be made simple i.e., without PAN and the requirement of obtain DSCs having encrypted value of their PAN, should be done away with.
Q. We sincerely hope that you would consider the above and issue a public clarification by way of a Notification/Circular and/or make necessary amendments in the rules. It is further requested that a copy of the said Notification/Circular be sent to the Bombay Chartered Accountants’ Society.
Considering the urgency of the matter and in view of the very limited time available to enable companies and their signatories to comply with the new procedure, an early response in the matter would be greatly appreciated.
Thanking you,
Yours faithfully,
For Bombay Chartered Accountants’ Society
Mayur Nayak Kishor Karia
President Chairman
Taxation Committee
