CA. Darshak Shah – CA. Urvi Asher – Keval Mehta
In India litigation are pending since years wherein lot of dispute are only due to trend followers. Government has received 20-25% of demand in majority of case at the cost of high litigation and administrative hassles. According to author its a smart move to collect taxes and reduce litigation. Government has come forward vide different circulars to clarify tax position in VsV scheme, 10 key takeaways for professionals and taxpayers are
1. VsV due dates
Until any extension, due date for application for opting VsV is 31st Dec 2020 and Payment date for beneficial tax rate is 31st March 2021
2. VsV coverage
- In order to compute disputed tax/interest/penalty, quantification is mandatory, hence scheme covers all kinds of Income tax disputes pending or deemed pending as on 31st January 2020 wherein income/penalty/interest is quantifiable. So an order u/s 263 wherein H’ble CIT has given general direction for revision of order and taxpayer has challenged validity of order u/s 263, said order is not eligible for VSV
- VsV is only covering disputes under Income tax Act
Any disputes under wealth tax or security transaction tax is not eligible for VsV settlement
3. All proceedings are inter-related
In case a taxpayer is under dispute for Quantum plus penalty matter on same tax addition, he/she cannot settle penalty proceedings alone unless quantum proceedings under dispute is settled. And once Quantum is settled under VsV, penalty is automatically waived by tax office.
4. Carry forward loss adjustment
Any loss under dispute which is subject to settlement can either be carried forward and claimed after payment of disputed tax or claim of loss can be surrendered by taxpayer
5. Consequential relief for deductor and deductee
VsV scheme provides for consequential relief in following cases
- If deductor settles TDS liability, deductee gets TDS claim in year of settlement
- If deductor pays disputed taxes for expense disallowance, deductee will not be required to pay tax on such income. However, interest and penalty shall be payable. If eligible, the deductee can settle interest and penalty by paying 25% of disputed tax on such interest and penalty
- If deductee pays disputed tax on corresponding income, deductor can claim consequential relief. However, interest and penalty shall be payable. If eligible, the deductor can settle interest and penalty by paying 25% of disputed tax on such interest and penalty
6. VsV is settlement & not acceptance of matter
Settlement of dispute under VsV does not result into acceptance and therefore does not impact any other matters. Also all years are independent & therefore if same matter is pending for dispute in other year, taxpayer has liberty to continue litigation for such other year.
7. Errors rectified before VsV payment
In case of mistake in computation of income or tax, get such mistake rectified before payment of taxes. And in case of delay in filing of appeal filed with condonation, apply for early hearing and get such appeal condoned before payment of tax under VsV scheme.
8. VsV considerate to Higher Authority Order
Any matter which is settled by Higher Authority in favour of tax payer, similar matter in dispute in other years before H’ble ITAT or High Court can be settled by paying 50% of disputed tax. In case Supreme Court decision being in favour of taxpayer, no tax is payable for similar issue under dispute in other years.
9. Prepaid tax adjustable
Any prepaid taxes by way of Advance tax/TDS/refund adjustment is adjustable against disputed tax liability and net amount is payable as per Form 3 certificate issued by tax office.
10. Co-operation from tax office
Tax office is acting as front end desk for resolving all kinds of taxpayers queries and technical glitches on fast forward pace.
Conclusion
There is always difference between right vs wrong & Good vs Bad. In author opinion, Taxpayer should evaluate good vs bad consequences of litigation while deciding option of VsV scheme. As litigation takes years to complete and at times interest exposure of matter exceeds tax exposure which is not free from hardship.
Author will be happy to clear queries of readers on email @ darshak@snco.in.
