Direct Tax Vivad Se Vishwas Scheme as passed by Loksabha on 04-03-2020 is accompanied by 55 FAQs isuued on the same day. The purpose is to remove doubts and facilitate speedy implementation. The clarifications issued under FAQs have been categorized into following heads
1. Clarifications on Cases eligible for Scheme
2. Cases Not eligible under the scheme
3. Mix of Qualifying and Non Qualifying Amounts
4. Multiple Appeals for the same Assessment Year
5. Consequential Relief for TDS Settlements
6. Concessions/Credit allowed in FAQ
7. Inconvenient Clarifications
8. FAQ related to withdrawal of appeal
9. FAQ related to rectifications
10. Other Important Issues Clarified in FAQs
Clarifications on Cases eligible for Scheme
Following cases are eligible to be covered under the scheme:
1. Appeal pending for admission by High Court [FAQ 24]
2. Even where assessee does not file any objection before DRP and is awaiting final order. However assessee to write in declration that time for filing objections before DRP has not expired.[FAQ 16]
3. Settlement of TDS liability u/s 201 of the Income Tax Act. [FAQ 31]
4. Arbitration, Conciliation or mediation proceedings initiated by declarant [FAQ 1]
5. Cases where total income has been determined by AAR and appeal against AAR decision is pending before High Court [FAQ 3]
6. Enhancement Notice u/s 251 issued by CIT A. Disputed Tax to be calculated on the basis of Enhancement notice[FAQ 17]
7. Departmental appeal against DRP Order. Amount payable shall be 50% of normal amount [FAQ 33]
8. Where multiple years are involved in search cases, each such year in which disputed tax is less than 5 crores shall get covered [FAQ 6]
9. Prosecution cases can get covered by compounding the offence [FAQ 22]
10. Cases set aside to AO for giving proper opportunity or to carry out fresh examination of the issue with specific direction shall be covered. In such cases while filling the declaration form, appellant can indicate that with respect to the set-aside issues the appeal is pending with the Commissioner(Appeals).[FAQ 7]
11. In cases where appeal is set aside on some issue and other issues are not in appeal and have attained finality because of appeal not having been filed, still declaration can also be filed in respect of concluded issues [FAQ 7]
Cases not eligible under the Scheme
Following cases are not eligible to be covered under the Scheme
1. Disputes pending before AAR [FAQ 3]
2. Cases where income has not been determined by AAR and consequential order is yet to be passed by AO [FAQ 3]
3. Interest Waiver application [FAQ 13]
4. Settlement of disputed tax will not settle disputed Fee. Both need to be separately settled [FAQ10]
5. Stand alone settlement of penalty without settling quantum is not possible [FAQ 8]
6. Wealth Tax [FAQ 18]
7. CTT [FAQ 18]
8. STT [FAQ 18]
9. Equalization Levy [FAQ 18]
10. Writ filed against section 148 in High Court where income is not determined [FAQ 12]
Mix of Qualifying and Non qualifying amounts
If the tax arrears include tax on issues that are excluded from the Vivad se Vishwas, such cases are not eligible to file declaration under Vivad se Vishwas. There is no provision under Vivad se Vishwas to settle part of a pending dispute in relation to an appeal or writ or SLP for an assessment year. For one pending appeal, all the issues are required to be settled and if anyone of the issues makes the declaration invalid, no declaration can be filed.[FAQ 11]
Multiple Appeals for same assessment year
Following cases are covered:
1. Where assessment has been framed for an assessment year and then reassessment is done for the same assessment year and both assessment and reassessment are in appeal.[FAQ 19]
2. Where both department as well as assesse are in appeal [FAQ 40]
3. Where assessee has filed appeal on certain issue but time to file appeal by the department has not expired and assessee is not sure whether department shall file appeal or not on issues decided in his favour [FAQ 36]
In above cases, declarant shall have following options:
1. Settle either of appeals/issues or
2. Settle both the appeals/issues
Consequential Reliefs for TDS Settlements
1. Disallowance u/s 40(a)(ia) in order u/s 143(3) shall get waived where assessee settles TDS issue u/s 201 under the Scheme. Where matter relating to order u/s 201 has already been finally decided in favor of assessee, still 40(a)(ia) disallowance shall get waived. If other issues are also involved in order u/s 143(3) and assessee wishes to settle order u/s 143(3)then disputed tax in respect of 40(a)(ia) may be taken as NIL [FAQ 31]
2. Deductee to be allowed credit of TDS liability settled by deductor. [FAQ 30]
3. Where deductee settles his income dispute and tax was deductible on such income then deductor shall also get relief from liability to deduct tax. However, he would be required to pay the interest under sub-section (IA) of section 201 of the Act. If such levy of interest under sub-section (IA) of section 201 qualifies for Vivad se Vishwas, the deductor in default can settle this dispute at 25% or 30% of the disputed interest [FAQ 32]
Concessions/Credits allowed in FAQ
1. Where DRP confirms addition on matter already decided in favour of assessee. The amounts payable shall be reduced to 50% of normal amount [FAQ 39]
2. Where department is in appeal against matter decided by High Court and SC has already decided the issue in favour of assessee, the amount payable on such issue shall be NIL[FAQ 37]
3. Credit of amount already paid towards demand and prepaid taxes shall be allowed [FAQ 5,26]
Inconvenient Clarifications in FAQ
1. No Interest for refund on account of 40(a)(ia) disputed tax getting waived due to settlement of TDS issues u/s 201[FAQ 31]
2. No Interest u/s 244A on excess deposit against demand under this Scheme [FAQ 5]
3. Order of Designated Authority is not appealable [FAQ 47]
4. Interest to be paid by deductee till the date of settlement on credit obtained due to TDS dispute settled by deductor. [FAQ 30]
This is against the spirit of section 205 and clarification issued by CBDT that no recovery can be made from deductee for tax deducted by deductor
FAQ relating to Withdrawal of Appeal
1. Withdrawal of appeal to made only after issue of Certificate by Designated Authority [FAQ 43]
2. Proof of request for withdrawal of appeal to be provided to Designated Authority [FAQ 43]
3. Department to withdraw appeal/writ/SLP on intimation of payment to Designated Authority by appellant [FAQ 48]
FAQ relating to Rectifications
1. Disputed Tax to be calculated after giving effect to rectification u/s 154 [FAQ 25]
2. Designated Authority has been empowered to rectify its order [FAQ 46]
3. Where substantive assessment is settled, AO shall delete protective assessment by rectification order [FAQ 35]
Other Important Issues clarified in FAQ
1. One Declaration to be filed for each assessment year. For different assessment years different declarations to be filed [FAQ 40]
2. The designated authority shall be instructed to grant a certificate at an early date enabling the appellant to pay the amount on or before 31 st March, 2020 so that he can take benefit of reduced payment to settle the dispute.[FAQ 41]
3. Declarant should apply for waiver of Interest u/s 220 even if it is not charged [FAQ 26]
4. If both quantum and penalty appeals are pending then detail of both appeals to be provided in declaration form though disputed tax to be paid for quantum appeal only. [FAQ 34]
5. Designated Authority shall mention in his order that Designated Authority shall not institute any proceeding in respect of an offence; or impose or levy any penalty; or charge any interest under the Income-tax Act in respect of tax arrears [FAQ 45]
6. Making Declaration does not tantamount to conceding tax position [FAQ 52,55]
7. Picking and choosing issues for settlement of an appeal is not allowed. With respect to one order, the appellant must chose to settle all issues and then only he would be eligible to file declaration.[FAQ 14]
Conclusion
At times FAQs appear to be stretching beyond the scope of the scheme. Last but not least the list of clarifications is not yet over and many more are expected to be in offing.
Author Bio
The assesse has been issued a show cause notice u/s279(1) of the income tax act asking for an explanation as to why prosecution u/s278B should not be initiated on account of failure to deposit TDs on time .
Section 9 of the Scheme of the VSV act provides for certain exceptions wherein the provisions of the Scheme would not apply. – One of them being in
Cases in which prosecution under the Act has been instituted on or before the date of declaration.
Since the Prosecution has still not been instituted the assesse is trying to opt for relief under the VSV scheme but is unable to do so as the drop down in the form is not facilitating the exercise of this option. Please advice .