The tax department today said provisions of ICDS, the new accounting standards for computation of business income, will prevail over judicial precedents.
The tax department today said provisions of ICDS, the new accounting standards for computation of business income, will prevail over judicial precedents.
ICDS, Income Computation and Disclosure Standards, are applicable for computation of income chargeable under the head profits and gains of business or profession or income from other sources and not for the purpose of maintenance of books of accounts.
The accounting standards came into effect from April 2016 (assessment year 2017-18). It aims to ensure consistency and help minimise tax-related disputes.
Seeking to instil confidence among stakeholders regarding applicability of ICDS, the Central Board of Direct Taxes (CBDT) today came out with a set of 25 FAQs.
It said the ICDS has been notified after due deliberations and examining judicial views to bring in certainty.
The department said certain judicial pronouncements were made in the absence of "authoritative guidance" on these issues under the Act for computing income under the head 'profits and gains of business or profession' or 'income from other sources'.
"Since certainty is now provided by notifying ICDS under Section 145(2), the provisions of ICDS shall be applicable to the transactional issues dealt therein in relation to assessment year 2017-18 and subsequent assessment years," the CBDT said.
The FAQ also said that in the case of conflict of ICDS general principles for computation of income with Income Tax Rules, the provisions of Rules which deal with specific circumstances shall prevail over ICDS provisions.
The CBDT also said that irrespective of the accounting standards adopted by companies, ICDS will apply for computation of taxable income.
Impact of ICDS will not be considered to compute profit under minimum alternate tax (MAT) as MAT is based on book profits.
"These clarifications are a welcome move and shall instil confidence in the stakeholders regarding applicability of ICDS," Nangia & Co Partner Vikas Gupta said.
The CBDT had notified ICDS with effect from April 1, 2015, following announcement by Finance Minister Arun Jaitley in the July 2014 budget. However, giving assessees more time for compliance, the tax department later postponed its implementation by a year to April 1, 2016.
(This article has not been edited by DNA's editorial team and is auto-generated from an agency feed.)
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