The new direct taxes code has provisions to restrain public sector undertakings and the tax department from taking their disputes beyond a certain level, a move aimed at curbing wasteful litigation.
Under the new provisions, the two parties can appeal before the commissioner, income-tax appeal (CITA), the first appellate body on tax matters. But they are not allowed to appeal before the income-tax appellate tribunal (ITAT), the second appellate forum.
The only recourse against a CIT (A ) order will be an authority for advance ruling and dispute resolution that is proposed to be set up once DTC becomes law. The authority’s orders cannot be challenged.
Though no precise data is available to determine the number of cases filed against the PSUs, tax professionals say at least 10% of all cases filed by tax authorities are against state-run firms. More than 25% of the revenue locked up in various stages of litigation could be in cases filed against PSUs, they say.
In the past, the Supreme Court had voiced concerns on such litigation, which according to it, was wasteful in many ways. A report published by the Law Commission in 1988 also had recommended measures to check the growing number of litigation by PSUs. The report had recommended the formation of a body that would monitor such disputes and end unnecessary litigation between PSUs and tax authorities.
The provisions proposed in the DTC are in tune with the general consensus on the need to put an end to such litigation in which everybody involved in it, except the lawyers arguing on either side, end up as losers.
This is a good proposal. Another way to reduce this litigation is to refix the limit of taxeffect involved for filing appeals before various court.
Eg: Now taxeffect required for filing appeal before the ITAT is Rs. 2,00,000/-. It can be raised to Rs. 5,00,000/-
taxeffect required for filing appeal before the HC is Rs.4.00.000 it can be raised to Rs. 10,00,000/- and finally taxeffect required for filing appeal before Apex Court is Rs. 10 lakhs , it can be raised to Rs. 25lakhs. It will surely reduce the number of cases and litigation process to a large extent.
It is not clear as to how two parties can appeal before thw Commissioner-one being the Assessing Officer himself.
This is regarding the proposed Direct Tax Code Bill about the reduction of appeals before various authorities. I understand that number of appeals are pending before various appellate authorities on issues which have seen the light of the day.I am very really happy to read that there is no appeal against the order of the Commissioner/Commissioner(A) for the IT department and PSUs in the proposed bill.I hope this will be irrespective of tax effect and question of law involved.This will definitely reduce litigations before the appellate authorities.I do not know how the bar association/CAs will take this issue in the DTC bill. I hope this will prevail even after discussions in the parliament.