NEW DELHI: The new direct tax dispute settlement scheme will not cover cases related to undisclosed overseas assets initiated on the basis of information from another country. Neither will it apply to prosecutions under the Prevention of Money Laundering Act (PMLA), the Benami Transactions (Prohibition) Act and the income tax Act.
Those applying for the scheme can’t appeal against the decision of the tax authorities and liability computations will be final.
Finance minister Nirmala Sitharaman introduced the Direct Tax Vivad Se Vishwas Bill, 2020, in the Lok Sabha on Wednesday, which she had announced during her February 1 budget speech.
The legislation is aimed at resolving disputed tax cases involving Rs 9.32 lakh crore that has been stuck for more than a year through 483,000 cases pending in various courts.
“This Bill emphasises on trust building,” the finance minister said, adding that the scheme will reduce needless litigation expenditure for the government and taxpayers.
Govt’s Tax Claim to Remain Intact
Sitharaman said the government’s tax claim will remain intact and “this structured and formula-based approach will help the taxpayer get relief without any discretion and the government to get the money”.
Aside from the legislation cited above, the framework won’t cover prosecutions under the Indian Penal Code, the Unlawful Activities (Prevention) Act, 1967, the Narcotic Drugs and Psychotropic Substances Act, 1985, and the Prevention of Corruption Act, 1988.
The Central Board of Direct Taxes (CBDT) has asked its offices to provide data on pending appeals in high courts. Revenue secretary Ajay Bhushan Pandey held a meeting with senior officials from CBDT and department of revenue for preparatory work on the scheme.
Income tax officers will be asked to convince taxpayers to opt for resolution under the scheme and will be rated on the success in this, said a person aware of the matter.
Taxpayers have up to March 31 to opt for the scheme. The tax authorities have to declare the amount that the entity or person has to pay within 15 days. They have to pay the amount within 15 days of being told how much they owe. Those who opt for the scheme after the date will have to pay an additional 10%. Sitharaman said the scheme will not be open ended. Those opting for the scheme will have to withdraw international arbitration, conciliation or mediation cases and provide proof to the department. Cases in the Supreme Court, high courts or Income Tax Appellate Tribunal (ITAT) will also have to be withdrawn. They will also have to waive their right to revive cases.
Vodafone, Cairn cases
Tax experts said this should help settle cases and bring down litigation. “This can be a very beneficial scheme for settlement for cases such as additions of unexplained cash deposited during demonetisation period, additions for penny stocks… where factually the taxpayers have high exposures,” said Rakesh Nangia, chairman, Nangia Andersen Consulting.
Vodafone and Cairn may be able to settle their tax disputes using this scheme as both are eligible, said Ved Jain, former president of the Indian Chartered Accountants of India. “Clause 2(j)(II) read with Section 4(4) provides withdrawal of arbitration proceedings in India or in any other country,” Jain said.
The government may have to elaborate on some aspects.
“Though the scheme is a welcome step, some aspects require clarification. For instance, whether the interest already paid by a taxpayer will be refunded he it opts for this scheme,” said Sanjay Sanghvi, tax partner, Khaitan & Co. “Given that the scheme has a limited window, taxpayers will have to quickly evaluate whether to opt for this scheme depending on merits of their pending tax disputes.”
If the order is not acceptable, the taxpayer doesn’t appear to have any recourse to reinitiate the withdrawn appeals, said Amit Maheshwari, partner, Ashok Maheshwary & Associates LLP. “This would require careful evaluation on the part of taxpayers on whether to opt for this scheme or not,” he said.
CBDT writes to field offices
CBDT, which frames the policy for the income tax department, wrote to all principal chief commissioners on Tuesday, asking them to collate and send the data by next week. “In order to implement the scheme, the CBDT needs database on such litigations pending at high court level,” the communication read. “It is therefore, requested that the data on pending appeals at high court level as on January 31, 2020, be obtained with the help of court registry and the same may be supplemented with the records of the field office.”
The CBDT has asked the regional income tax department chiefs to “personally monitor” the exercise and submit the data by February 14 by email.