With the objective to reduce the pending income tax litigation, the lower House of the Indian Parliament has on 4th of March 2020 passed the Direct Tax Vivad se Vishwas Bill, 2020. The Bill, once enacted, will also generate timely revenue for the Government and benefit the taxpayers by providing them peace of mind, certainty and savings on account of time and resources that would otherwise be spent on the long-drawn and vexatious litigation process. According to the provisions of the Bill which sets to amend the Income Tax Act, 1961, pending litigation in Direct Tax matters can be settled by making prescribed payments by 31st of March 2020.
It may be noted that the Bill as passed by the Lok Sabha is slightly different from the one presented before the Parliament earlier this month. The Bill now not only widens the scope of the Vivad se Vishwas Scheme but also reduces the compliance burden on the taxpayers.
CBDT has recently also issued Circular No. 7/2020, dated 4-3-2020 to clarify on certain issues relating to the scheme. Some of the important clarifications are highlighted below.
- An assessee whose case is pending in arbitration is eligible to apply for settlement under the scheme even if no appeal is pending.
- Writ pending against AAR order, where AAR has determined the total income of an assessment year, to be covered.
- Declarations covering disputed interest (where there is no dispute on tax corresponding to such interest) are eligible.
- Appeals in which appellant has already paid the disputed demand either partly or fully are covered. Further, refund will be available if the amount of tax paid is more than the amount payable under the scheme.
- Cases where Appellate Authority has set aside order for giving proper opportunity or to carry out fresh examination of the issue, are covered.
- No settlement of penalty appeal only when appeal on disputed tax related to such penalty is still pending.
- No provision under the scheme to settle part of a pending dispute in relation to an appeal/writ/SLP for an AY.
- Waiver applications are not ‘appeals’ within the meaning of the scheme.
- Cases where draft assessment order has been passed and final order is awaited, are covered.
- Cases involving enhancement notice by CIT(A) before specified date, are covered.
- Scheme available even if appeal not filed though time to file appeal has not expired.
- Taxpayer has a choice to compound the offence and opt for the scheme where only notice for initiation of prosecution has been issued with reference to tax arrears.
- Disputed tax to be calculated after giving effect to the rectification order passed, if any.
- Credit for taxes paid against the disputed tax before filing declaration shall be available to the declarant.
- TDS deductee will be allowed to claim credit of taxes in respect of which the deductor has availed of the scheme. Deductor also entitled to get consequential relief of allowable expenditure under proviso to Section 40(a)(i)/(ia) in the year in which the tax was required to be deducted.
- When a person receiving income settles his appeal/ arbitration with reference to income which was not subjected to TDS by deductor in default, then such deductor would not be required to pay the corresponding TDS amount. However, interest liability persists under Section 201.
- If the appellant has got decision in his favour from Supreme Court on an issue, he need not settle that issue.
- Interest and penalty will be waived only in respect of the issue which is disputed in appeal and for which declaration is filed.
- Amount paid in pursuance of a declaration made under the scheme is not refundable.
- No appeal is required to be withdrawn before the grant of certificate by DA.
- DA can amend his order under clause 5 of the Bill to rectify any apparent errors.
- Making a declaration under the scheme shall not amount to conceding the tax position.
- Secondary adjustment under Section 92CE will be applicable if assessee avails of the scheme for Transfer Pricing adjustment, subject to conditions.