Article analyses Vivad se Vishwas Scheme Proposed by Central Government for disputed Direct Tax Dues and explains Salient features of Vivad se Vishwas bill, 2000 and issues which may arise or which arises on which Government needs to clarify.
Tax amnesty/dispute resolution schemes are introduced by the countries world over and are advertised as a benefit extended by the government to the defaulters/disputers pay taxes. Here is a brief history of various amnesty schemes introduced in India by various governments.
|Sr. No.||Year||Scheme name|
|1||1951||VDS Tyagi Scheme|
|2||1965||Block voluntary disclosure scheme|
|3||1975||Voluntary disclosure scheme|
|5||1997||Voluntary disclosure of income scheme (VDIS-97)|
|6||2016||Income and Assets Declaration Scheme (IADS)|
|7||2016||Direct Tax Dispute Resolution Scheme, 2016|
|8||2016||Pradhan Mantri Garib Kalyan Yojana (PMGKY)|
Apart from the above list, one cannot ignore the recently implemented “Sabka Vishwas – (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS)” for indirect taxes.
Why does the government have to come up with amnesty schemes/dispute resolution schemes?
Aren’t these schemes acting as a disincentive for regular compliers?
Is the government really extending the olive branch to the defaulters/disputers?
Let’s explore the answers.
The quantum of disputed dues: –
The statement of objects and reasons and reasons attached to the direct tax vivad se vishwas bill, 2000 states that the amount of disputed tax arrears are Rs. 9.32 lakh crores as compared to tax collections for FY 2018-19 of Rs. 11.37 crores. Carrying such a huge due has its implications. As we all know there is time value associated with money. A rupee today isn’t worth the same tomorrow.
It also states “Tax disputes consume copious amount of time, energy and resources both on the part of the Government as well as taxpayers. Moreover, they also deprive the Government of the timely collection of revenue. Therefore, there is an urgent need to provide for resolution of pending tax disputes.”
The ratio of successes of government: –
Also important is to understand and accept the probability of you winning a dispute before putting efforts behind continuing it. The success ratio of the department at ITAT, high courts and supreme courts is very low-under 30%, possibly between 10% to 20%. Under such circumstances, if you apply a probability of winning 30% cases, you will end up giving up 70% of the amount stated as dues. In such circumstances, it is better to receive anything more than 30% for government.
For any dispute to be fought, there arises need for resources. The income tax infrastructure, the appellate tribunals, departmental representatives’ emoluments, lawyers’ fees. All this can be saved proportionately if a dispute is settled otherwise.
Salient features of Vivad se Vishwas bill, 2000
1. Cases Covered
a. Appeals pending with supreme court, high courts, ITAT, commissioner appeals as on 31/01/2020,
b. TDS TCS appeals are also covered,
c. orders for which time limit for filing appeals has not expired on 31/01/2020,
d. cases pending before dispute resolution panel as on 31/01/2020,
e. cases where assessee filed revision under section 264 on or before 31/01/2020,
f. search cases where disputed demand is less than Rs. 5 Crore covered.
2. Declaration to be submitted under section 4 in prescribed form and manner.
3. The designated authority within 15 days of receipt of declaration shall determine the amount payable and issue a certificate indicating the amount payable.
4. The declarant shall pay the amount payable within 15 days of the receipt of certificate and intimate to the designated authority.
5. Every order passed shall be conclusive and no order or other matter covered shall be reopened under the income tax act or any other law for the time being in force.
6. Non applicability
a. Tax arrears in relation to
i. Block assessment in search cases where demand more than Rs. 5 crore.
ii. A year in respect which prosecution is initiated.
1. Assessments based on information obtained under DTAAs.
2. Relating to an appeal before the Commissioner (Appeals) in respect of which notice of enhancement under section 251 of the Income-tax Act has been issued
3. to any person in respect of whom an order of detention has been made under the provisions of the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 on or before the filing of declaration:
4. to any person in respect of whom prosecution for any offence punishable under the provisions of
a. the Indian Penal Code,
1. the Prevention of Corruption Act, 1988,
4. to any person notified under section 3 of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 on or before the filing of declaration.
7. Relief proposed
|Type of case||Amount payable up to 31-03-2020||Amount payable on or after 01-04-2020|
|Cases relating to disputed tax, interest chargeable and penalty on such disputed tax|
|If an appeal is filed by a taxpayer, in whose case search and seizure have occurred, and the disputed tax does not exceed Rs. 5 crores.||Amount of disputed tax plus 25% of disputed tax.||Amount of disputed tax plus 35% of disputed tax|
|If an appeal is filed by a taxpayer, in any other case.||Amount of disputed tax.||Amount of disputed tax plus 10% of disputed tax|
|If an appeal is filed by the department, in cases where search and seizure have occurred, and the disputed tax does not exceed Rs. 5 crores.||50% of disputed tax plus 12.5% of disputed tax||50% of disputed tax plus 17.5% of disputed tax|
|If an appeal is filed by the department, in any other case.||50% of disputed tax||50% of disputed tax plus 5% of disputed tax|
|Note: Where 25% or 35% or 17.5% or 12.5% or 10% or 5% of disputed tax, as the case may be, exceeds the total of interest and penalty, such excess amount shall be ignored.|
|Cases relating to disputed interest, penalty and disputed fee|
|If an appeal is filed by the taxpayer||25% of disputed interest, penalty or fee||30% of disputed interest, penalty or fee|
|If an appeal is filed by the department||12.5% of disputed interest, penalty or fee||15% of disputed interest, penalty or fee|
‘Disputed Tax’ in relation to an assessment year shall have the following meanings:
|Nature of case||Disputed Tax|
|Where appeal, writ petition or special leave petition is pending before the appellate forum on or before 31-01-2020||Amount of tax (including surcharge and cess but excluding interest) payable if such appeal was to be decided against taxpayer|
|Where appeal, the writ petition has been passed on or before 31-01-2020 and time limit for filing appeal against such order has not expired||Amount of tax (including surcharge and cess but excluding interest) payable by the taxpayer after giving effect to such order|
|Where objections are pending before the DRP||Amount of tax (including surcharge and cess but excluding interest) payable by the taxpayer if DRP was to confirm variation proposed in the draft order|
|Where DRP issued directions but the Assessing Officer didn’t pass an order on or before 31-01-2020||Amount of tax (including surcharge and cess but excluding interest) would have been payable by taxpayer had the order been passed by the Assessing Officer.|
|Where an application for revision under section 264 filed by the taxpayer is pending||Amount of tax (including surcharge and cess but excluding interest) payable by the taxpayer if the application was to be rejected|
|Where CIT(A) has issued an enhancement notice under section 251||Amount of tax (including surcharge and cess but excluding interest) payable by the taxpayer in respect of enhancement proposed in additions to amount payable relating to the disputed issue.|
|In cases where disputed tax is related to reduction of MAT/AMT credit or loss or depreciation, the taxpayer has an option either to include amount of tax (including surcharge and cess but excluding interest) related to loss in amount of disputed tax or carry forward the reduced MAT/AMT credit or loss or depreciation, in a manner to be prescribed.|
1. ‘Disputed interest’ means any interest determined under the provisions of the Act (not being an interest charged or chargeable on disputed tax) against which appeal has been filed and pending before the appellate forum.
2. ‘Disputed penalty’ means any penalty determined under the provisions of the Act (not being a penalty levied or leviable on disputed income or disputed tax) against which appeal has been filed and pending before the appellate forum.
3. ‘Disputed fee’ any fee which is determined as per the provisions of the Act against which appeal has been filed and pending before the appellate forum.
1. Multiple issues with respect to one assessment year
There are various cases where multiple issues are part of a single appeal. On some issues, the assessee may expect a favourable outcome and on some others, there may be adverse outcome expected. In such a scenario the assessee is not allowed to sever a part of appeal for dispute resolution scheme and continue in part with appeal.
2. Withdrawal of appeals
Once taxpayer files declaration under the scheme, any appeal pending before the ITAT or CIT(A), in that respect, shall be deemed to have been withdrawn from the date on which certificate is issued by the designated authority. But for a case, where the declarant has filed any appeal before the appellate forum or any writ petition before the High Court or the Supreme Court against any order in respect of tax arrears, he has to withdraw the same and submit the proof of withdrawal with declaration. This withdrawal before issue of certificate is a bit tricky and may cause confusions in the matters where acceptability of declaration by the department doubted by the taxpayer.
3. Disputes arising out of scheme
The scheme is governed by a separate act. There are possibilities of disputes arising out of interpretation and calculation issues in certificates issued. Currently no appellate mechanism is specified for resolution of these disputes.
4. No reduction in tax
The proposed scheme, provides an option to pay full tax where dispute in related to tax liability. Recently concluded “Sabka Vishwas – (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS)” for indirect taxes extended 40% to 70% relief of tax amount to tax payer. This relief was one of the biggest reasons why many taxpayers opted for the scheme ensuring its success. If the assessee is willing to pay tax, most of the time, he will not opt for appeal. Although, it is worth noting that for long outstanding disputes, the element of interest and penalty is also worth considering, but for recently concluded proceedings resulting in liabilities to the taxpayers, the incentive could have been kept at a higher rate by providing higher relief ultimately leading to success of scheme.
[Views expressed in this article are strictly personal in nature and readers are advised to apply their independent mind, knowledge and take assistance of professionals in appropriate cases before acting.]