Budget 2022: Insight on proposed disallowances

Yogesh Shah, Vimal Desai & Girish Sukhyani – [2022] 135 taxmann.com 139 (Article)

The Finance Minister in the Budget speech presented in the parliament on 1 February 2022, stated that “The proposals in this budget, while continuing with our declared policy of stable and predictable tax regime, intend to bring more reforms that will take ahead our vision to establish a trustworthy tax regime. This will further simplify the tax system, promote voluntary compliance by taxpayers, and reduce litigation.”

In the absence of specific provision / clarity under the Income Tax Act,1961 (‘ITA’ or ‘the Act’), in the past, various judiciaries, including High Courts have held the matter (with regards to the allowances /deduction of certain expenses) in the favour of taxpayers. Based on those judicial precedents coupled with the absence of specific provision under the ITA, various taxpayers were claiming allowance /deduction for the same. To put an end to this and reduce litigation, Finance Bill, 2022 (‘the Bill’) has proposed various deduction / expenditure to be not allowed while computing the total income of the taxpayers and some of them are retrospective / clarificatory in nature.

In this article, the authors will be inter alia discussing some of these proposed amendments and its impact on any past claims.

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