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An ephemeral measure
July, 08th 2006

Form 2F caters to the non-business class which largely includes the salaried, by far are the most tax-compliant thanks to the TDS scheme.

Form 2F, introduced with effect from June 1, 2006, will be valid only for Assessment Year 2006-2007. This much is conceded by the form itself as well as by the departmental press release on the issue. And as per the amended Rule 12, the existing Saral Form 2E can be used till July 31, 2006.

In other words, Form 2F is going to have an extremely limited use to be filled in by those individuals and HUFs making the grade by having no business income, etc., and who wake up late to the need for filing the return for the Assessment Year 2006-2007. To be sure those filing the return within the prescribed time would plump for the simpler Form 2E. In the event, the question that is being asked naturally is why this ephemeral measure especially given the fact its ghost the cash-flow statement has been exorcised.

The form says it is entirely optional for assessees to fill in Schedule 5, setting out the cash-flow statement for the period April 1, 2005 to March 31, 2006. That the form itself would become unusable thereafter makes the cash-flow statement a non-starter.

Maybe the Department would like to bring in a new Form 2F, including the requirement to set out the cash-flow statement for subsequent years.

Half-hearted move

But the point is why initiate a measure half-heartedly and dilute its main plank even as it is put in place. The form does away with the statutory requirement of attaching proof of payment of advance tax and tax deducted at source, cast by Section 139. There is a small technical hitch here.

Rule 12 has been amended by the CBDT pursuant to the power that it has in this regard under Section 295, whereas the power to do away with the rigours of Section 139 is available under Section 119(2).

This small but significant infirmity must be set right. Form 2F is intended as an e-return which is perhaps why the need for enclosures has been done away with. But since one is simultaneously required to follow up the e-return with a paper return as well, where is the difficulty in submitting TDS certificates, etc?

As it is, it is not even mandatory for one to send Form 2F across electronically. Form 2F caters to the non-business class which largely includes the salaried, by far the most tax-compliant thanks to the TDS scheme obtaining for it.

But, ironically, the exhortation to come clean through cash-flow statement is made to them.

The threat of analysing the cash-flow statement in juxtaposition with the Annual Information Report submitted by banks, mutual funds, Registrar of Properties, and so on, should have been held out to the business class which, thanks to the code for computation of business income, has considerable latitude for tax planning.

Evidently, the Department has ushered in a measure without thinking through its ramifications.

S. Murlidharan
(The author is a Delhi-based chartered accountant.)

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