Narayan Jain, LL.M., Advocate
Vivad se Vishwas Scheme – 2020 has undergone lot of changes and it has been passed by Lok Sabha on 4th March, 2020. It is a welcome scheme and will help reduce pending litigations. The key features of the scheme, after amendments, are as under :
1. Widening of the Eligibility for the Vivad se Vishwas Scheme
Originally, the Bill has proposed to cover appeals pending before CIT(A), ITAT, High Court and Supreme Court. It is proposed to expand the scope of the Scheme by covering the following matters :
a) Orders where time limit for filing appeal has not expired as on 31.01.2020
b) Case pending before DRP as on 31.01.2020 as well as cases where DRP had issued directions on or before 31.01.2020 but no order has been passed
c) Revision petitions pending before CIT u/s 264 on 31.01.2020
d) Search cases where the disputed demand is less than Rs. 5 Crore – The limit of Rs. 5 crore will be computed year wise.
2. Amount of Payment to be made under Vivad se Vishwas Scheme
Appeals filed by the assessee
|Appeals filed by the assessee
|Where payment made up to 31.03.2020||Where payment made after 31.03.2020|
|1.||Search cases involving dispute relating to tax, interest, penalty, etc.||125% of the disputed tax. Penalty and interest would be waived||135% of disputed tax, penalty and interest would be waived|
|2.||Other than search cases where dispute involves tax, interest, penalty, etc.||100% of the disputed tax, penalty and interest would be waived||110% of disputed tax, penalty and interest would be waived|
|3.||Where dispute relates to only interest, penalty or levy||25% of disputed interest, penalty or fee – balance 75% would be waived||30% of disputed interest, penalty or fee – balance 70% would be waived|
Appeals filed by Department or the Department has lost an issue
|Appeals filed by Department or the Department has lost an issue||Where payment made up to 31.03.2020||Where payment made after 31.03.2020|
|1.||Search cases involving dispute relating to tax, interest, penalty, etc.||62.5% of the disputed tax. Penalty and interest would be waived||67.5% of disputed tax, penalty and interest would be waived|
|2.||Other than search cases where dispute involves tax, interest, penalty, etc.||50% of the disputed tax, penalty and interest would be waived||55% of disputed tax, penalty and interest would be waived|
|3.||Where dispute relates to only interest, penalty or levy||12.5% of disputed interest, penalty or fee – balance 87.5% would be waived||15% of disputed interest, penalty or fee – balance 85% would be waived|
3. Who cannot opt for the Scheme
The search cases where disputed tax is more than Rs. 5 Cr, prosecution cases, cases involving undisclosed foreign income/ assets and the cases completed on the basis of information received from other countries would not be covered under the scheme. Further, cases covered under certain laws such as Benami law, PMLA, 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 would continue to remain out of the scope of the scheme.
4. Refund of excess tax paid by taxpayer
The amended Scheme now proposes to provide for refund of excess tax paid by taxpayer before filing declaration over the amount payable under the Scheme
5. Declaration will not set any precedence
The revised Scheme now provides that filing of declaration will not set any precedence and it cannot be claimed in any other proceedings that the taxpayer or the Department has conceded its tax position by settling the dispute.
6. Revised Scheme doesn’t allow filing declaration issue-wise
Though the revised Scheme doesn’t allow filing declaration issue-wise [i.e. it is not possible for declarant to file declaration for some issues and litigate the balance issues], it provides that 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.
7. Proof of withdrawal of appeal to be submitted with the intimation of payment
On withdrawal of appeal, the amended Scheme proposes to provide that 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.
8. Withdrawal of appeals by Department
Scheme now proposes to provide for withdrawal of appeals by Department, whereby “the department would also withdraw the appeal/writ before the issuance of final certificate for settling dispute.”
9. Carry forward / set-off of losses
The revised Scheme also proposes a mechanism for carry forward / set-off of losses. It provides that in case where the AO has reduced the returned loss by making addition, 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.
10. Transfer pricing adjustment
On the transfer pricing aspect, the revised scheme proposes to provide that the settling of dispute regarding transfer pricing adjustment would not have any effect on the secondary adjustment, and the taxpayer would be required to repatriate fund to India in respect of settled transfer pricing adjustment.
11. CBDT likely to notify rules, forms and issue clarifications
It is expected that the Central Board of Direct Taxes will notify rules, forms as well as issue clarification on contentious issues for smooth implementation of scheme.
The deadline for payment of tax without any extra payment of 10 per cent is 31st March 2020. It seems to be inadequate time frame as the taxpayers will be able to file declaration in the prescribed form and after consulting their Advocate or Chartered Accountant. Then the [prescribed authority will examine the matter and will issue a certificate advising the amount of payment to be made. Time for making such payment is also another 15 days. Thus with a practical view point the deadline for payment of tax (without extra 10 per cent) should be amended as 30th April, 2020 instead of 31st March, 2020. Further in case of delay in payment at best interest at the rate of 1 per cent only should be charged and declarant taxpayer should not be required to pay extra 10 per cent. I hope all concerned will take benefit of this scheme to considerably reduce the litigations.
Narayan Jain is a tax Advocate and Hony Co-ordinating Editor, Taxman. He is also former President of DTPA and Member, National Direct Taxes Representation Committee of All India Federation of Tax Practitioners. Email firstname.lastname@example.org