Taking a cue from the income tax department that employs third parties to report on high-value transactions of various kind in order to verify the veracity of tax filings by individuals, the Central Board of Excise and Customs (CBEC) has given the State Electricity Boards and Reserve Bank of India specific assignments in its efforts to detect and curb tax evasion.
According to a CBEC notification issued earlier this year, the SEBs are required to file annual information returns (AIRs) under sub-section (1) of section 15A of the Central Excise Act on the electricity consumed by manufacturing units using induction furnace or rolling mill and whose aggregate (annual) value of clearances exceeds Rs 1.5 crore. The boards need to file the AIRs pertaining to a particular financial year by June 30 in the subsequent year.
The idea, of course, is to cross-check information provided by the assessees and ascertain if they under-reported production to evade/under-pay excise duty and/or service tax.
The CBEC has also made it mandatory for the RBI to file detailed AIRs on overseas remittances above Rs 50 lakh by companies for the services received by them.
While the Modi government has averred time and again that it is committed to a non-adversarial tax regime and has taken many steps in that direction especially in reducing the rigour in tax pricing audits, the taxman is determined to use the information at his disposal to validate the filings by the taxpayers. While the AIR database is mined by the I-T department to find out cases of under-payment of taxes, greater synergy is being achieved in the use of the database now between direct and indirect tax departments.
As reported by FE earlier, even as the NDA government made efforts to make life easier for taxpayers — leaving only the retrospective tax issues largely unresolved — tax disputes have only piled up. At the level of commissioners-appeal (CITs-A), the first recourse of the taxpayer in case of dispute, 2.8 lakh appeals involving a whopping Rs 5.67 lakh crore were pending till October last year, sharply up from the corresponding figures of 2.32 lakh and Rs 3.84 lakh crore at the end of the previous financial year. In other words, in the seven months to October-end last year, unsettled disputes pending before these commissioners rose 21% and the amount locked up surged 48%.
In the year to April-end, 2015, a period which too largely belonged to the National Democratic Alliance government, appeals pending before the CITs-A have only risen, though less steeply.
However, scores of US-based tech biggies have reduced their tax liabilities in India as New Delhi and the US resolved as many as 100 pending tax disputes involving India-incorporated associates of these firms in the last one year without resort to litigation.
The tax disputes arose after India’s tax authorities made allegedly aggressive TP adjustments; these have now been amicably settled thanks to a bilateral framework agreement signed earlier.
What paved the way for the agreement was the provision of mutual agreement procedure (MAP) in the India-US Double Taxation Avoidance Convention.