Interest cannot be levied on Gross GST Liability before adjusting ITC: Madras HC

Interest cannot be levied on Gross GST Liability before adjusting ITC: Madras HC

Case Law Details

Case Name : Refex Industries Ltd. Vs Assistant Commissioner of CGST & Central Excise (Madras High Court)

Appeal Number : Writ Petition Nos.23360 and 23361 of 2019 & WMP Nos.23106 and 23108 of 2019

Date of Judgement/Order : 06/01/2020

Refex Industries Ltd. Vs Assistant Commissioner of CGST & Central Excise (Madras High Court)

According to the petitioners, Section 50 that provides for levy of interest on belated payments would apply only to payments of tax by cash, belatedly, and would not stand triggered in the case of available ITC, since such ITC represents credit due to an assessee by the Department held as such.

The specific question for resolution before me is as to whether in a case such as the present, where credit is due to an assessee, payment by way of adjustment can still be termed ‘belated’ or ‘delayed’. The use of the word ‘delayed’ connotes a situation of deprival, where the State has been deprived of the funds representing tax component till such time the Return is filed accompanied by the remittance of tax. The availability of ITC runs counter to this, as it connotes the enrichment of the State, to this extent. Thus, Section 50 which is specifically intended to apply to a state of deprival cannot apply in a situation where the State is possessed of sufficient funds to the credit of the assessee. In my considered view, the proper application of Section 50 is one where interest is levied on a belated cash payment but not on ITC available all the while with the Department to the credit of the assessee. The latter being available with the Department is, in my view, neither belated nor delayed.

The argument that ITC is liable to be reversed if it is found to have been erroneously claimed, and that it may be invalidated in some situations, does not militate with my conclusion as aforesaid. The availment and utilization of ITC are two separate events. Both are subject to the satisfaction of statutory conditions and it is always possible for an Officer to reverse the claim (of availment or utilization) if they are found untenable or not in line with the statutory prescription. Credit will be valid till such time it is invalidated by recourse to the mechanisms provided under the Statute and Rules.

I am supported in my view by a recently inserted proviso to Section 50(1) reading as below:

Provided that the interest on tax payable in respect of supplies made during a tax period and declared in the return for the said period furnished after the due date in accordance with the provisions of section 39, except where such return is furnished after commencement of any proceedings under section 73 or section 74 in respect of the said period, shall be levied on that portion of the tax that is paid by debiting the electronic cash ledger.

The above proviso, as per which interest shall be levied only on that part of the tax which is paid in cash, has been inserted with effect from 01.08.2019, but clearly seeks to correct an anomaly in the provision as it existed prior to such insertion. It should thus, in my view, be read as clarificatory and operative retrospectively.

FULL TEXT OF THE HIGH COURT JUDGEMENT

The Petitioners are registered as assessee under the provisions of the Central Goods and Service Tax Act, 2017 (in short ‘CGST Act’). The petitioners have admittedly filed Returns of income belatedly for the period 2017-18. Communications dated 07.05.2019 (in W.P.No.23360 of 2019) and 15.05.2019 (in W.P.No.23361 of 2019) computing the delay in filing of Returns and consequently the interest to be remitted on the tax accompanying the Returns were issued by the 2nd respondent in the following terms:

W.P.No.23360 of 2019:

Sl.No.	Month	Delay (No. of days)	Duty paid (in Rs.)	Interest to be paid @ 18%
1.	August – 17	140	5016431	346340
2.	September-17	110	2103842	114126
3.	October – 17	81	817158	32642
4.	November-17	51	817158	20552
5.	December -17	18	629658	5589
6.	January – 18	91	5312557	238410
7.	February – 18	63	1566965	48683
8.	March – 18	32	22789660	359640
			Total	1165982

W.P. No. 23361 of 2019:

Sl.No.	Month	Delay (No. of days)	Duty paid (in Rs.)	Interest to be paid @ 18%
1.	July – 17	31	27000	413
2.	August – 17	258	900000	114510
3.	October – 17	197	534714	52045
4.	November-17	167	534714	44119
5.	December -17	134	268898	17769
6.	January – 18	181	13535680	1208199
7.	February – 18	155	12103153	925145
8.	March – 18	143	7750	547
			Total	2362746

2. Demand notices were issued to the Banks (R3) seeking to recover the arrears of interest from the balances in the accounts of the petitioners.

3. The petitioners objected stating that they had sufficient Input Tax Credit (ITC) available with the Department and thus interest could be demanded, if at all, only on the cash component of the tax remitted belatedly. This amounted to a sum of Rs.1,21,701/- (in W.P.No.23360 of 2019) and Rs.1,25,751/-(in W.P.No.23361 of 2019) and the amounts have been remitted on 14.06.2019. According to the petitioners, the total tax payable, being Rs.3,94,49,225/- in W.P.No.23360 of 2019 and Rs.2,74,71,771/- in W.P.No.23361 of 2019, was remitted by way of cash to an extent of Rs.19,55,634/- (in W.P.No.23360 of 2019) and Rs.12,19,151/- (in W.P.No.23361 of 2019) and Rs.3,74,93,591/- (in W.P.No.23360 of 2019) and Rs.2,62,52,620/- (in W.P.No.23361 of 2019) from out of the available ITC. The proceedings for coercive recovery of the interest are impugned in the present Writ Petitions.

4. Though the petitioners have raised other grounds as well, including one of the violation of principles of natural justice, the only issue agitated is the legal issue as to whether interest would at all be payable on the component of ITC that was, admittedly, available with the Department throughout and that has been adjusted towards the tax demands for the period August, 2017 to March, 2018.

5. There is some history to this matter as this very issue appears to have been raised earlier by a petitioner in W.P.No.15978 of 2019. A learned single Judge, by order dated 13.06.2019, directed the petitioner therein to remit the admitted tax, being tax on the cash component of the demand belatedly paid and the Department to dispose the representation of the petitioner in that case to the effect that there would be no liability to interest in regard to the ITC available with the Department.

6. As against the aforesaid order, Writ Appeals were filed before the Division Bench and by order dated 23.07.2019, the two Hon’ble Judges expressed divergent views. One Judge dismissed the Writ Appeals, whereas the second Judge was of the view that the legal issue on the leviability of interest called for a deeper consideration than had been extended by the learned single Judge at the stage of admission and such summary dismissal required revisiting.

7. The matter was thus referred to a Third Judge, who by his order delivered on 19.12.2019, held that Writ Appeals of the Revenue were not warranted, since the learned single Judge had not in the original instance determined the legal issue in a manner detrimental to the Revenue, but only remitted the matter back to the Assessing Officer to determine the quantum of liability. The aforesaid orders are circulated for my benefit by learned counsel.

8. The question crystallised by the Third Judge for consideration is as to whether interest on belated payment of tax as contemplated under Section 50 of the CGST Act is automatic or whether the same would have to be determined after considering the explanation offered by the At paragraph 29, the Hon’ble Judge holds that the liability to pay interest under Section 50 is automatic. However, since the petitioner in that case had raised disputes with regard to the period for which the tax had allegedly not been paid, as well as the quantum of tax remaining unpaid in excess of ITC, all being questions of fact, he was of the view that such matters would have to be resolved after hearing the assessee. He categorically states ‘therefore in my considered view though the liability fastened on the assessee to pay interest is an automatic liability, quantification of such liability certainly needs an arithmetical exercise after considering the objections if any, raised by the assessee.’ The objections raised in that case are thus factual and relate to disputed questions of fact as noted by me in the earlier portion of this paragraph.

9. However, the objection raised by the petitioners before me is not one of fact but one of law. According to the petitioners, Section 50 that provides for levy of interest on belated payments would apply only to payments of tax by cash, belatedly, and would not stand triggered in the case of available ITC, since such ITC represents credit due to an assessee by the Department held as such.

10. In order to decide the purely legal issue raised by the petitioners, it is necessary to extract Section 50 itself, which I do below:

‘Interest on delayed payment of tax:

“(1) Every person who is liable to pay tax in accordance with the provisions of this Act or the rules made thereunder, but fails to pay the tax or any part thereof to the Government within the period prescribed, shall for the period for which the tax or any part thereof remains unpaid, pay, on his own, interest at such rate, not exceeding eighteen per cent, as may be notified by the Government on the recommendations of the Council.

(2) The interest under sub-section (1) shall be calculated, in such manner as may be prescribed, from the day succeeding the day on which such tax was due to be

(3) A taxable person who makes an undue or excess claim of input tax credit under sub-section (10) of section 42 or undue or excess reduction in output tax liability under sub-section (10) of section 43, shall pay interest on such undue or excess claim or on such undue or excess reduction, as the case may be, at such rate not exceeding twenty-four per cent, as may be notified by the Government on the recommendations of the Council.”

11. The Section provides for interest on belated payment of tax and as held by the third Judge, such levy is ‘automatic’, and is intended to compensate the revenue for the remittance of tax belatedly and beyond the time frames permitted under law. Though in the context of the Income Tax Act, 1961, the question of whether remittance of interest under Sections 234 A, 234B and 234C of the Income Tax Act, 1961 for belated filing of return, belated remittances of advance tax and deferment of advance tax are mandatory came to be considered by the Supreme Court in the case of Commissioner Of Income Tax, Mumbai vs Anjum M.H.Ghaswala & Ors (252 ITR 1), and held to be compensatory and hence mandatory. The principle of the said judgment applies on all fours to the present case.

12. The specific question for resolution before me is as to whether in a case such as the present, where credit is due to an assessee, payment by way of adjustment can still be termed ‘belated’ or ‘delayed’. The use of the word ‘delayed’ connotes a situation of deprival, where the State has been deprived of the funds representing tax component till such time the Return is filed accompanied by the remittance of tax. The availability of ITC runs counter to this, as it connotes the enrichment of the State, to this extent. Thus, Section 50 which is specifically intended to apply to a state of deprival cannot apply in a situation where the State is possessed of sufficient funds to the credit of the assessee. In my considered view, the proper application of Section 50 is one where interest is levied on a belated cash payment but not on ITC available all the while with the Department to the credit of the assessee. The latter being available with the Department is, in my view, neither belated nor delayed.

13. The argument that ITC is liable to be reversed if it is found to have been erroneously claimed, and that it may be invalidated in some situations, does not militate with my conclusion as aforesaid. The availment and utilization of ITC are two separate events. Both are subject to the satisfaction of statutory conditions and it is always possible for an Officer to reverse the claim (of availment or utilization) if they are found untenable or not in line with the statutory prescription. Credit will be valid till such time it is invalidated by recourse to the mechanisms provided under the Statute and Rules.

14. I am supported in my view by a recently inserted proviso to Section 50(1) reading as below:

Provided that the interest on tax payable in respect of supplies made during a tax period and declared in the return for the said period furnished after the due date in accordance with the provisions of section 39, except where such return is furnished after commencement of any proceedings under section 73 or section 74 in respect of the said period, shall be levied on that portion of the tax that is paid by debiting the electronic cash ledger.

15. The above proviso, as per which interest shall be levied only on that part of the tax which is paid in cash, has been inserted with effect from 01.08.2019, but clearly seeks to correct an anomaly in the provision as it existed prior to such insertion. It should thus, in my view, be read as clarificatory and operative retrospectively.

16. Learned counsel for the petitioners also draw my attention to the decision of the Telengana High Court in the case of Megha Engineering and Infrastructures Ltd. V. The Commissioner of Central Tax and others (2019-TIOL- 893), where the Division Bench interprets Section 50 as canvassed by the Revenue. The amendment brought to Section 50(1), was only at the stage of press release by the Ministry of Finance at the time when the Division Bench passed its order and the Division Bench thus states that ‘unfortunately, the recommendations of the GST Council are still on paper. Therefore, we cannot interpret Section 50 in the light of the proposed amendment’. Today, however, the amendment stands incorporated into the Statute and comes to the aid of the assessee.

17. In the light of the above discussion, these Writ Petitions are allowed and the impugned notices are set aside. No costs. Connected Miscellaneous Petitions are closed.

Sec 50. Interest on delayed payment of tax

Sec 50. Interest on delayed payment of tax

[1] Every person who is liable to pay tax in accordance with the provisions of this Act or the rules made thereunder, but fails to pay the tax or any part thereof to the Governmentwithin the period prescribed, shall for the period for which the tax or any part thereof remains unpaid, pay, on his own, interest at such rate, not exceeding eighteen per cent., as may be notified by the Government on the recommendations of the Council.

[2] The interest under sub-section [1] shall be calculated, in such manner as may be prescribed, from the day succeeding the day on which such tax was due to be paid.

[3] A taxable person who makes an undue or excess claim of input tax credit under sub-section [10] of Section 42 or undue or excess reduction in output tax liability under sub-section [10] of Section 43, shall pay interest on such undue or excess claim or on such undue or excess reduction, as the case may be, at such rate not exceeding twenty-four per cent., as may be notified by the Government on the recommendations of the Council.

Jun (जून) में निरस्त हो जाएंगे सोसाइटी,चैरिटेबल ट्रस्ट के पंजीकरण

गैर-निवासियों के लिए रिटर्न फाइलिंग दायित्व

Return filing obligation for non-residents

There are two concepts which a country follows for taxing income. These are residence based taxation and source based taxation. Though Indian residents are subject to tax on their global income, non-residents, earning income from India can only be taxed in India by applying the source rule.

Non-residents earning income and not having any presence in India are subject to tax on a gross basis. The types of income earned by non-residents typically include interest, dividends, royalties and Fee for technical services ('FTS'). For income from India, non-residents are also liable to file a return disclosing the income earned. If the income so earned is subject to withholding tax, such tax can be claimed as credit in the return. If these payments are from a related party, transfer pricing compliances would also need to be undertaken. It can be burdensome for foreign companies and other non-resident taxpayers to file returns in India for just a solitary source of income be it interest, dividends, royalty or FTS.

The Income-tax Act, 1961 ('the Act') states that non-resident taxpayers would not be required to file their income tax returns in India if interest or dividend is the only source of income and on which tax has been withheld. This exemption was not available to non-resident taxpayers who were earning royalty or FTS from India.

While providing some relief to such non-residents, the Hon'ble Finance Minister has proposed in the Finance Bill, 2020 that it would not be necessary to file an income tax return in India for a non-resident taxpayers where royalty/FTS is the only source of income and tax thereon has been withheld at a rate not lower than the rate prescribed under section 115A of the Act i.e. 10% (plus surcharge and health and education cess).

It is however worth mentioning here that where the beneficial provisions of a Double Taxation Avoidance Agreement ('DTAA') are availed and the royalty/FTS is not subject to withholding tax (because of the restrictive scope) or tax is withheld at a lower rate (flat rate of 10%) than the rate under section 115A, the proposed exemption from filing of the return would not be available.

Generally, the rate of royalty/FTS under DTAAs entered by India is 15%, however, there are a few DTAAs which have a rate of 10%. A few examples of these being the ones entered with France, Germany and South Africa Japan etc. Unless it is contended that the payments are not taxable, taxpayers could choose withholding under the Act and not file a return of income since the tax rate for royalty/FTS is almost same (the difference being only surcharge and health and education cess) under the DTAAs and the Act.

Another amendment proposed in the Finance Bill, 2020 which impacts the return filing obligations for non-residents earning dividend income from India is the abolition of the Dividend Distribution Tax ('DDT'). After this amendment, the tax burden has shifted to the recipient from the Company declaring dividend. Although non-residents for whom dividends is the only source of income from India are not required to file their income tax returns here, the condition of withholding tax on these akin to what has been inserted for royalty/FTS needs to be fulfilled as these are now taxable in the hands of the recipients. In other words, non-residents earning only dividend income from India would not be required to file their income tax returns provided these have been subject to withholding tax at a rate not lower than the rate prescribed under section 115A of the Act. The rate so prescribed is 20% (plus surcharge and health and education cess).

A point to ponder here is that most of the DTAAs which India has entered have got a rate ranging from 5% to 15% which unlike the rates for Royalty/FTS. are much lower than the rate under section 115A. Thus, having regard to the monetary benefit, non-residents would prefer to avail the lower tax rates in the respective DTAA and file their returns in India.

The Government has not provided exemptions to non-residents availing the provisions of the DTAAs as it would want to examine their eligibility for availing these provisions and verify and scrutinize their claims in the return of income filed.

Having said that, though the Government is providing relief to non-residents from return filing in India on fulfilment of conditions of withholding under the Act, there is no exemption for complying with Indian transfer pricing regulations for transactions with related parties. Thus, even if the return is not being filed by virtue of Section 115A, non-residents would need to furnish Form 3CEB through its e-filing account. Further, the exemption is only for prescribed nature of income. A non-resident earning different types income would not be entitled to the exemption for filing its return of income.

The income tax law in India with reference to non-residents has evolved over the past many years. There was a time when non-residents were subject to tax on royalty/FTS at the rate of more than 25% and made to suffer higher withholding for not having a PAN. The rates later were brought down and the requirement of PAN was also relaxed. Now the Government has provided further relief in respect of the requirement for filing tax returns. It will have to be seen that what all is further done by India in order to jump up in the ease of doing business rankings.

Source:-TAXMANN

Key Take-way of the decision of the Hon’ble Supreme Court (SC)*

*Key Take-way of the decision of the Hon’ble Supreme Court (SC)*

1. *The Hon'ble SC has refused to interfere in the order as passed by the Hon’ble High Court of Rajasthan and accordingly confirmed that no late fees shall be levied during period 06.02.2020 to 12.02.2020*. The Hon’ble SC after recording the statement of the Ld. Solicitor General (SG) held that no penal consequences shall be taken for delayed filing of Form GSTR-9 / 9C.

2. Further, during the arguments Ld. SG also confirmed for refund of late fees as charged during intermittent period i.e. 06.02.2020 to 12.02.2020. However, in case  if late fees as charged not refunded then appropriate application to be moved before the Hon’ble High Court of Rajasthan. 

3. It is imperative to note that late fees of INR 200 per day shall be levied for filing of Form GSTR-9 / 9C after 12.02.2020.

4. The Hon’ble SC has directed the Petitioner i.e. Union of India (Ministry of Finance) to upgrade the portal capacity/efficiency as soon as practicable.

5. Members should preserve the evidences of technical difficulties as faced by them on the common portal on daily basis and submit it to the Association so that the same can be used in further/final hearing of the case.

6. Hon’ble High Court is free to finally decide and give any relief on the basis of facts presented by both the parties and this order would not come in the way.

7. It is advisable to all the members to uploaded the requisite forms at earliest possible.

8. Conclusion - No extension beyond 12. No assurance of waiver of penalty beyond 12. No guess, When and what will be the final order? This litigation has achieved mere 5 to 7 days of extension. No timeline fixed for Revenue to respond to SC on the glitches. After 2 days matter would be buried. 

CA Amresh Vashisht

COMPARISON OF OLD VS NEW REGIME OF INCOME TAX – Budget 2020

BRIEF

The budget was expected to be a path-breaking one, being the first budget of the new decade. However, as has been the case with earlier budgets, it is bound to fall short of middle-class expectations, who will be required to make their choices very prudent so as not to indulge in too much of consumption at the cost of their compulsive savings u/s 80-C, which was meant generally for their old age. Most talked provision in budget is INSERTION OF Section 115BAC

The new Sec. 115BAC has proposed to be inserted to provide an option to Individual or HUF’s to pay tax at a lower rate subject to certain conditions. This will be applicable for AY 21-22 i.e FY 20-21 

 This section is optional and the option shall be exercised for every previous year where the assessee has no business income.
 Furthermore, if the assessee having business income than in that case the option once exercised for the P.Y. shall be valid for that P.Y. and for all subsequent years. The option can be withdrawn only once other than the previous year in which exercised and shall be continued with Normal provisions of Income Tax (other than 115BAC) thereafter, till ceases to have any business income. We have made a comparison chart showing taxation based on both regimes. tHIS WILL TAKE CARE OF SALARIED & NON-SALARIED ASSESSEE

At Last, we want to comment that, Indian Income-tax was WAY OF FINANCE PLANNING. Indirectly middle class was inspired to Buy house on Loan, Take Life insurance, take Mediclaim because There were Deductions (Still there but Mindset will change)

So Earlier, Invest and Save Tax

NOW, Why Invest? , Just Save Tax  

It is very saddening to see that, Previous generation has saved enough to enjoy retirement. Probably Our generation and our next generation will go away from the habit of investing and saving. 

Anyways, We are here comparing the new regime versus the old regime 

Interestingly, the new regime is definitely not beneficial for the Middle class & lower middle class. check below comparison

इधर कैश में लेन-देन किया उधर मैसेज पर आ जाएगा इनकम टैक्स का नोटिस, अब होगी रियल टाइम मॉनिटरिंग

इनकम टैक्स डिपार्टमेंट (Income Tax Department) हाई वैल्यू ट्रांजैक्शन को लेकर टैक्सपेयर से सीधा संपर्क कर सकता है. साथ ही विभाग SMS, मेल के जरिए ट्रांजैक्शन की डिटेल्स मांगी जा सकती है.

नई दिल्ली. इनकम टैक्स डिपार्टमेंट (Income Tax Department) अब हाई वैल्यू ट्रांजैक्शन (High Value Transaction) की रियल टाइम मॉनिटरिंग (Real Time Monitoring) करेगा. साथ ही रिटर्न भरते समय प्री-फिल्ड फॉर्म (Pre-Filled Form) में कैपिटल गेन (Capital Gain), डिविडेंड (Dividend) और ब्याज (Interest) से होने वाली कमाई की डिटेल्स की जानकारी पहले से होगी. इनकम टैक्स डिपार्टमेंट (IT Department) ट्रांजैक्शन को लेकर टैक्सपेयर से सीधा संपर्क कर सकता है. साथ ही विभाग SMS, मेल के जरिए ट्रांजैक्शन की डिटेल्स मांगी जा सकती है.

हाई वैल्यू ट्रांजैक्शन्स पर टैक्स विभाग की निगरानी

हाई-वैल्यू ट्रांजैक्शन पर IT विभाग की नजर होगी. आयकर विभाग बैंक ट्रांजैक्शन की रियल टाइम निगरानी करेगा. IT विभाग ट्रांजैक्शन को लेकर टैक्सपेयर से सीधा संपर्क कर सकता है. साथ ही विभाग SMS, मेल के जरिए ट्रांजैक्शन की डिटेल्स मांगी जा सकती है. बता दें कि अभी कहाईवैल्यू ट्रांजेक्शन्स की बैंक सीधे टैक्स विभाग को नहीं देते हैं केवल ट्रांजैक्शन की मासिक, तिमाही डिटेल दी जाती हैं. टैक्सपेयर से संपर्क के लिए मोबाइल ऐप लॉन्च किया जाएगा. 

हाई-वैल्यू ट्रांजैक्शन पर IT विभाग की नजर होगी. आयकर विभाग बैंक ट्रांजैक्शन की रियल टाइम निगरानी करेगा. IT विभाग ट्रांजैक्शन को लेकर टैक्सपेयर से सीधा संपर्क कर सकता है. साथ ही विभाग SMS, मेल के जरिए ट्रांजैक्शन की डिटेल्स मांगी जा सकती है. बता दें कि अभी कहाईवैल्यू ट्रांजेक्शन्स की बैंक सीधे टैक्स विभाग को नहीं देते हैं केवल ट्रांजैक्शन की मासिक, तिमाही डिटेल दी जाती हैं. टैक्सपेयर से संपर्क के लिए मोबाइल ऐप लॉन्च किया जाएगा

प्री-फिल्ड रिटर्न में बदलाव

अब प्री-फिल्ड रिटर्न में MF, शेयर से कमाई का ब्यौरा देना होगा. डिविडेंड, ब्याज इनकम भी फॉर्म में पहले से दिखेगी. डिविडेंड पर TDS की जानकारी फॉर्म-16 (Form-16) में देनी होगी. 5,000 रुपये से ज्यादा डिविडेंट इनकम पर टीडीएस काटने का नियम है. बता दें कि स्वीडन जैसे कुछ देश प्री-फिल्ड टैक्स रिटर्न फॉर्म के कॉन्सेप्ट को सफलतापूर्वक लागू कर चुके हैं. भारत ने पिछले साल सीमित रूप से इसकी शुरुआत की थी. IT विभाग इसके लिए एजेंसियों से जानकारी जुटाएगा. ये जानकारी विभाग को SEBI, RBI और बैंकों से मिलेगी.

Source:-https://hindi.news18.com/amp/news/business/high-value-transactions-and-other-income-to-be-monitored-by-income-tax-department-2840941.html?__twitter_impression=true

Analysis of Direct Tax Vivad Se Vishwas Bill, 2020 (डायरेक्ट टैक्स विवाद से विश्वास विधेयक, 2020 का विश्लेषण)

Analysis of Direct Tax Vivad Se Vishwas Bill, 2020

The Hon’ble Finance Minister while rendering the Budget 2020 on 1st February 2020 made an important announcement of reducing the pending litigation matters substantially, by introducing ‘Vivad se Vishwas Scheme’. Accordingly, on 5th February 2020, The Direct Tax Vivad Se Vishwas Bill, 2020 was introduced in the Lok Sabha, the provisions of which are explained herein under: –

A. Applicability:

Person in whose case an appeal is filed by him or by income tax department or by both against an assessment/reassessment order or in respect of TDS/TCS which is pending before Supreme Court/ High Court/ ITAT/ CIT(A) as on 31.01.2020 irrespective of whether the demand in such case is pending/ paid is eligible to make a declaration under this dispute resolution scheme.

B. Object:

To resolve the direct tax disputes and rest litigation by paying the disputed tax arrears with concession.

C. Amount Payable:

Sr. No	Nature of Tax Arrear	Amount payable on/ before 31st March 2020	Amount payable on/ after 1st April 2020 but before last date.
1.	Where it is aggregate of disputed tax, interest, penalty	Amount of Disputed Tax	Disputed Tax + 10% of Disputed Tax
2.	Where it related to Disputed interest/ penalty/ fees	25% of Disputed Interest/ Penalty/ Fees	30% of Disputed Interest/ Penalty/ Fees

Note:

(i) ‘Disputed Tax’ is the tax on additions which have been contested in appeal

(ii) ‘Disputed fee’ is the fee determined for which appeal is filed

(iii) ‘Disputed Interest / Penalty’ is the interest or penalty as the case may chargeable or charged for which appeal is filed

(iv) ‘Last date’ may be notified later although announced as 30th June, 2020 in the Budget Speech

D. Procedure:

i. Declarant is required to file a declaration in prescribed form before the Designated Authority (not below the rank of CIT)

ii. Upon filing such declaration, relevant appeal shall be deemed to have been withdrawn, from the date of certificate issued by the Designated Authority u/s. 5(1).

iii. An undertaking in the prescribed form shall be furnished by the Declarant waiving his rights (direct or indirect) to seek or pursue any remedy or any claim in relation to tax arrears otherwise available under any law.

iv. Designated Authority within 15 days from date of receipt of declaration; by order, determine the amount payable by the declarant and grant a certificate.

v. Declarant shall pay the amount determined within 15 days of receipt of such certificate and intimate the Designated Authority pursuant to which Designated Authority pass an order to that effect which will be conclusive.

vi. Consequent to such order being passed by Designated Authority, no proceedings of any offence, penalty or interest in respect of any tax arrears be instituted against the declarant.

vii. Any amount paid pursuance of such declaration shall not be refundable under any circumstances.

E. Exclusions

> In respect of Tax Arrears relating of Appeal:

1. Tax arrears arising out of order passed u/s. 153A or 153C.

2. Assessment Year in respect of which prosecution has been instituted on or before the date of filing the declaration.

3. Any undisclosed income from a source located outside India or undisclosed asset located outside India.

4. An assessment or reassessment made based on the information received under an agreement referred to in section 90 or 90A related to any tax arrears.

5. Any appeal before CIT(A) in respect of which notice of enhancement u/s. 251 has been issued on or before 31st January 2020.

> Any person in respect of whom an order of detention has been made under the provision of Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 on or before filing of declaration, unless otherwise revoked/ set-aside subject to relevant conditions.

> Any person in respect of whom Prosecution or any offense punishable under IPC, the unlawful Activities (Prevention) Act, 1967, Narcotics Drugs & Preventions, PCA, PMLA, PBPT or for purpose of enforcement of any civil liability has been instituted on or before filing of declaration or such person has convicted of any such offence punishable under any of these Acts.

> Any person notified u/s. 3 of the Special Court (Trial of Offence) on or before the filing of declaration.

F. Issues to Ponder

1. Amount already paid earlier:

Payment prescribed in section 5(2) shall cover such cases where payment towards disputed taxes have already been made earlier and accordingly, the form so to be prescribed should provide for relevant disclosures/ adjustments and resultant refunds in cases where excess amount is already paid earlier.

2. Effect of reduction in losses or conversion of loss into Income:

Where the appeal is filed and pending before appellant forum in respect of additions resulting into reductions in losses or conversion of loss into income, then the disputed tax is defined to be the tax on such amount in respect of which appeal is filed had it been the total income. Hence, in such cases, there is no persuasive value.

3. Pick and choose facility not available:

Amount payable being the disputed tax is so defined that the said tax is to be computed for the whole of the additions in respect of which appeal is filed. Hence, one cannot go ahead to resolve litigation for certain issue and continue the litigation for other issues as such pick and choose option is not available.

4. Hearing is concluded/ but order is not passed

In cases where hearing is concluded but order is not passed, appellant should immediately move an application to the relevant appellant forum about their willingness to avail the benefit under this scheme and that no order be passed until the order u/s. 5(2) is passed by the Designated Authority.

5. Timeline for carrying out pending rectification be given:

There may be cases where rectification as regard to non- granting of proper set-off of brought forward losses on account of computation error, etc. are pending at the end of the jurisdictional Assessing Officer/ CPC which have an impact in determining the correct tax on Total Income. In absence of carrying out such rectification in a timely manner, the amount payable for the disputed tax cannot be determined correctly u/s. 5(1).

6. No Option to challenge the arithmetical correctness of amount payable:

As per the section 5(1); the Designated Authority is required to determine the amount payable by the declarant and grant a certificate to the declarant containing particulars of the tax arrears and the amount payable after such determination, in such form may be prescribed. Here after such determination of amount payable; there is no option on the part of the declarant to either move a rectification application or challenge its arithmetical correctness before any higher authority.

7. Whether Writ petitions filed before courts covered?

Writs filed cannot be termed as an appeal filed but on reading the provisions harmoniously specifically section 4(3), it appears that any writ petitions before the High Court or Supreme Court are also covered.

8. Whether matter before the Dispute Resolution Panel (DRP) is covered?

There would be cases where an assessee may have filed objections before the DRP against a draft assessment order passed as per section 144C and consequential assessment order is pending as on 31.01.2020. Such cases are not eligible for the benefit under the scheme, although ideally, ought to have been considered.

9. Whether matter before the Commissioner of Income Tax in relation to Revision Petition u/s. 264 is covered?

There would also be certain cases where revision petition may have been filed by the assessee u/s. 264 of the Act, may be for the reason of delay in filing an appeal before the CIT(A). Certainly, such cases are not appeals filed before CIT(A) and hence, such assessees would also be deprived of any benefit under the scheme, although ought to have been covered.

10. Year of search is covered but not preceding 6 years

It is strange to note that the year of search is covered for obtaining the benefit of the scheme whereas the preceding six years are not covered as assessments made u/s. 153A or 153C are excluded.

In view of the above discussion, it is important that certain clarifications may be issued, or suitable modifications may be done in the said Bill before it becomes the Act. Nevertheless, it appears that the benefit under this Scheme would be taken by many litigants to buy peace of mind and avoid unwarranted litigations over the years. I hope that this results into a Win-Win situation to both – for the appellants as well as the government in their objective to resolve disputes.

About Author-

CA RUSHABH MEHTA