Amended Direct Tax Vivad se Vishwas Bill, 2020

BACKGROUND

• Presently, a large number of Income-tax appeals are pending at various levels of adjudication namely, Commissioner (Appeals), Income Tax Appellate Tribunal (ITAT), High Courts, and Supreme Court. These appeals have been filed by taxpayers as well the Department.
• Due to the fact that every year more appeals are filed than are disposed, the pendency at the various levels of adjudication keeps on increasing.
• As on 30th November, 2019, there are about Four lakh Eighty-three thousand (4,83,000) appeals pending at various levels. Tax arrears to the tune of about Nine lakh Thirty-two thousand crore rupees (Rs. 9.32 lakh crore) are locked up in these appeals.

Direct Tax Vivad se Vishwas Bill, 2020 & Notice for amendments

• Direct Tax Vivad se Vishwas Bill, 2020 has been introduced in the parliament on 5th February, 2020. After introduction of the Bill, suggestions from various stakeholders have been received.
• Based on these representations, certain amendments to the provisions of the Bill have been approved by the Cabinet in its meeting dated 12th February, 2020. Notice for these amendments after obtaining the recommendation of the Hon’ble President has been given to the Parliament on 14th February, 2020.

SALIENT FEATURES OF THE BILL WITH THE AMENDMENTS PROPOSED IN NOTICE

KEY DATES:

• Start date: Date on which the provisions of the Bill come into force
• Last date: Date to be notified by the Government
• Pay by 31st March, 2020 to avoid higher payment

ELIGIBILITY:

• Appeals/writs filed on or before 31.01.2020 are eligible
• Orders for which time for filing appeal has not expired on 31.01.2020
• Case pending before Dispute Resolution Panel (DRP) on 31.01.2020
• Cases where DRP issued direction on or before 31.01.2020 but no order has been passed
• Cases where assessee filed revision (Section 264) on or before 31.01.2020
• Search case if the disputed demand is less than Rs. 5 Crore

DISPUTES COVERED:

• All disputes, subject to some exclusion, in relation to the -
• Disputed tax
• Disputed penalty
• Disputed interest
• Disputed Fee
• Disputed tax deducted at source (TDS) or tax collected at source (TCS)
• The appeals/writs filed by taxpayers or the department are eligible
• Disputes where the payment has already been made shall also be eligible

PAYMENT TERMS:

A. If the appeal is filed by the taxpayer:

• In case payment is made till 31st March, 2020 - Declarant will need to pay-
• 100% of the disputed tax (125% of disputed tax in case of search cases) – Penalty & interest shall be waived
• 25% of the disputed penalty, interest or fee in case dispute relates to disputed penalty, interest or fee only – Balance 75% shall be waived.
• In case payment is made after 31st March, 2020 - Declarant will need to pay-
• 110% of the disputed tax (135% of disputed tax in case of search cases) - Penalty & interest shall be waived  
• 30% of the disputed penalty, interest or fee in case dispute relates to disputed penalty, interest or fee only - Balance 70% shall be waived.

B. If the appeal is filed by the Department or the department has lost on an issue:

• In case payment is made till 31st March, 2020 - Declarant will need to pay-
• 50% of the disputed tax (62.5% of disputed tax in case of search cases) – Penalty & interest shall be waived
• 12.5% of the disputed penalty, interest or fee in case of appeals related to disputed penalty, interest or fee only – Balance 87.5% shall be waived
• In case payment is made after 31st March, 2020 - Declarant will need to pay-
• 55% of the disputed tax (67.5% of disputed tax in case of search cases) – Penalty & interest shall be waived  
• 15% of the disputed penalty, interest or fee in case of appeals related to disputed penalty, interest or fee only - Balance 85% shall be waived.

EXCLUSIONS:

The cases excluded from the Scheme are cases –

• Search case if disputed tax is more than Rs. 5 crores
• Prosecution cases under the Income-tax Act or IPC filed by the Department
• Cases relating to undisclosed foreign income and assets
• Cases completed on the basis of information from foreign countries
• Cases covered under Narcotic Drugs and Psychotropic Substances Act, Special Courts Act, the Unlawful Activities (Prevention) Act, 1967, the Prevention of Corruption Act, the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974, the Prevention of Money Laundering Act, 2002 or the Prohibition of Benami Property Transactions Act, 2016.

CONSEQUENCES:

• Consequent to such declaration and fulfillment of conditions, appeals/writs/objections of taxpayers & department in respect of the disputed income, disputed interest or disputed penalty or disputed fee pending before the Commissioner (Appeals), DRP, ITAT, High Court or Supreme Court shall be withdrawn.
• Immunity will be granted from institution of any proceeding for prosecution for any offence under the Income-tax Act in respect of matters covered in the declaration and also provide immunity from imposition of penalty and levy of interest.
• Filing of declaration will not set any precedence and neither the Department nor the taxpayer can claim in any other proceedings that the taxpayer or the Department has conceded its tax position by settling the dispute.

REFUND OF EXCESS AMOUNT:

• If the amount paid by taxpayer before filing declaration exceeds the amount payable under the Scheme, the taxpayer would be granted the refund for such excess amount.

REMOVAL OF DIFFICULTY:

• If any difficulty arises in giving effect to the provisions of this Scheme, the Central Government may by order not inconsistent with the provisions of this Scheme remove the difficulty.

DELEGATED LEGISLATION:

• The Central Government may notify rules for carrying out the provisions of this Scheme.
• The Central Board of Direct Taxes has been given powers to issue such orders, instructions and directions to the income-tax authorities for the proper administration of this Bill.

OTHERS:

• The limit of disputed tax of Rs. 5 crores for filing declaration in a search case shall be computed year wise. Hence, in a search case where the aggregate disputed tax for two or more years exceeds Rs 5 crore, a person can file declaration for those years in which the disputed tax does not exceed Rs. 5 Crore.
• If there are more than one issues involved in the appeal, the taxpayer would be required to file declaration for all issues, he cannot file declaration for some issues and litigate the balance issues.
• In a case where the taxpayer has got a favourable decision on an issue at higher forum, he would be required to pay only 50% of disputed tax on that issue even in the cases in which he has filed appeal.
• The taxpayer would be required to submit the proof of withdrawal of appeal/writ with the intimation of payment i.e. before the issuance of final certificate for settling dispute and not with the declaration as originally proposed in the Bill. The department would also withdraw the appeal/writ before the issuance of final certificate for settling dispute.
• In case where the Assessing Officer has reduced the returned loss by making addition of income/disallowing expenditure, the taxpayer shall have an option to either pay the notional tax on amount by which the loss has been reduced and carry forward the claimed loss without reduction or by accepting the reduced carry forward of loss without making any payment under the Scheme. Same mechanism would apply for reduction in MAT credit.
• The settling of dispute regarding transfer pricing adjustment would not have any effect on the secondary adjustment, both being independent provisions, and the taxpayer would be required to repatriate fund to India in respect of settled transfer pricing adjustment.

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