Though the scheme was notified only on Tuesday after receiving Presidential assent, senior tax officials said the department was already ready with rules and forms to kick-start the process.
With the deadline for the direct tax dispute resolution scheme (Vivad se Vishwas) looming, the Central Board of Direct Taxes (CBDT) on Wednesday asked its zonal heads to notify a ‘designated authority’ – a necessary condition in the relevant Act to operationalise the scheme – as only the authority will have jurisdiction over the declarants.
While the scheme will continue to be in force after March 31, it won’t offer the same benefits after the cut-off date.
Though the scheme was notified only on Tuesday after receiving Presidential assent, senior tax officials said the department was already ready with rules and forms to kick-start the process. The CBDT has asked the zonal chiefs to comply with notifying ‘designated authority’ on Wednesday itself.
Shailesh Kumar, director at Nangia Andersen Consulting, said: “Given the limited time available before prescribed due date of March 31, and also considering that a lot of companies/ taxpayers are now working from home due to ongoing corona scare, it may be advisable for the government to extend the timeline so that taxpayers have sufficient time.”
The scheme is meant for 4.83 lakh direct tax-related disputes for which appeals are pending at various levels. Tax arrears of about Rs 9.32 lakh crore are stuck in these appeals as on November 31, 2019.
The scheme is designed to ensure taxpayers avail of it before March 31 as it becomes less attractive after the deadline. For payments made after March 31, 55% of the disputed tax (67.5% of disputed tax in case of search cases) will be payable for cases won by assessee in the previous round. The amount would be 15% of the disputed penalty, interest or fee in case appeals are related to these.
Similarly, for cases won by the department earlier, but the payment being made by taxpayer under the scheme after March 31, 110% of the disputed tax (135% of disputed tax in case of search cases) is payable even though penalty and interest portion is waived off. For cases related to only disputes in penalty, interest and fees, 30% of the disputed amount is payable.
The Act, however, restricts the amount of disputes that can be settled at Rs 5 crore if they emanate from search and seizure operations. During a debate on the Act in Parliament, finance minister Nirmala Sitharaman explained that cases above Rs 5 crore had been excluded so that large evasion-related cases and fraud cases do not take advantage of it. “That is why we have limited it to the topmost extent of Rs 5 crore and not beyond. So, we do not want disputes which involve larger sums to take advantage of the scheme much before we can even establish what is behind those kind of disputes,” the finance minister said.
Sitharaman also clarified that only those disputes which pertain to or come under the Income Tax Act will be taken up under the scheme, and not those which fall under the Wealth Tax Act.
She had said the secondary adjustment to the provision only applies for assessment year 2017-18 and subsequent years. It does not apply to earlier years to which most of the transfer pricing cases pertain. For those who have paid part of the demand amount during the litigation process, the differential amount would be refunded.