Pharma to tourism: Top firms under I-T dept lens over advance tax payment

Many companies in sectors like pharma, tourism defer payment despite growth

The income-tax (I-T) department is set to crack down on dozens of marquee companies which are among leading advance tax payers, but paid less even when their business was doing well.

According to I-T sources, the department conducted an extensive analysis where it found that companies from sectors such as pharmaceuticals, hospitality, entertainment and tourism were deferring advance tax payments. The tax sleuths also discovered that there were lower payments even when growth was intact.

“While examining the quarterly financial results to estimate these assessees’ advance tax liability, it was observed that that the payment was not commensurate with the profit earned,” said an I-T official.

Besides, they also found that some of the taxpayers had paid less without citing any proper reason. “The I-T department has made a separate list of such taxpayers which showed huge differences between the income and expenses to defer the payment,” official said.

According to an official, the department has sought an explanation from these companies over the mismatch in earnings and source of money allocated for investments in their books.

Besides, the department has also analysed top defaulters in tax deducted at source (TDS) and plans to follow up or dispose of such cases. Sources said that the tax department has also drawn a list of 10,000 entities which have not filed TDS and issued notices to them.

“We have been conducting on-the-spot verification where the team of tax officials pay a surprise visit to the business premises of firms suspected for TDS default and ask them to pay the amount immediately, in cases where they are unable to justify the offence,” said another tax official.

The move comes after the Central Board of Direct Taxes (CBDT), in a recent review meeting, asked tax sleuths to focus more on collection of advance tax and TDS. I-T officers will also pursue insolvent companies.

The CBDT also discussed some actions which could help it shore up the direct tax revenue kitty which looks difficult in the current scenario. This is because the financial sector is grappling with a liquidity issues.

During this review meeting, CBDT noted that the prosecution list in case of TDS collection has been increasing and the trend of not filing TDS by the defaulters is in sharp contrast to other companies in similar businesses.

Sources said the department, however, is confident of achieving the ambitious target of Rs 11.5 trillion in direct taxes. In the six months ended September 30, 2018, gross direct tax collections rose 16.7 per cent to Rs 5.47 trillion compared to the year-ago period. While gross corporate tax collection went up 19.5 per cent, personal income tax growth stood at 19.1 per cent. Advance tax collections up to September were up 18.9 per cent, of which Mumbai, witnessed a growth of 15.4 per cent.