The government has come up with amendments to The Direct Tax Vivad Se Vishwas Bill, 2020.
The Direct Tax Vivad se Vishwas Bill, 2020 (‘the Bill’) was introduced in the Parliament on 5th Feb 2020. After the introduction of the Bill, a notice for moving the following amendments to the provisions of the Bill has been given to the Parliament on 14th Feb 2020, which is subject to the approval of and passing by the Parliament and receiving the assent of the President.
While presenting the Union Budget 2020 in the Parliament on 1st February 2020, the Finance Minister Nirmala Sitaraman has announced the government is introducing No Dispute but Trust Scheme – ‘Vivad Se Vishwas’ Scheme in order to reduce tax litigation.
In this context, The Direct Tax Vivad Se Vishwas Bill, 2020 was presented in Loksabha on 05.02.2020. The bill has certain lacunas and was criticized for such issues. Further, suggestions from various stakeholders have been received. As a result, the government has come up with amendments to The Direct Tax Vivad Se Vishwas Bill, 2020.
The proposed amendments so released contain 12 amendments to the Bill. The amendments are discussed below-
1. Changes in the definition of the 'appellant':
[Amendment of Section 2(1)(a)]
[Amendment of Section 2(1)(a)]
The definition of 'appellant' has been modified and is spelt more clearly to cover the writ petition, special leave petition (SLP) apart from the appeals.
A person is also defined as 'appellant' against whom an order has been passed but the time limit to file an appeal or SLP against the order has not expired as on 31.01.2020.
Further, a person who has filed objections before the Dispute Resolution Panel (DRP) under section 144C and the DRP has not issued any direction by 31.01.2020 is also an appellant for this scheme. It also covers a case where DRP has issued directions but the Assessing Officer has not passed any order on or before 31.01.2020.
A person who has filed a revision petition before the Commissioner under section 264 shall also be an appellant.
Before the amendment: Prior to the amendment, the term 'appellant' was defined in simple words to mean the assessee or the income-tax authority or both who has filed an appeal before the appellate forum and such appeal is pending on the specified date of 31.01.2020.
The scope of the appellant is widened and the income tax authority is excluded in the amended definition.
2. Definition of 'disputed tax' changed:
[Amendment of section 2(1)(j)]
[Amendment of section 2(1)(j)]
The term 'disputed tax' has been changed completely. The formula given in the Bill has been removed in the amendment. It now provides the computation of the disputed tax under different circumstances in a different manner.
As per the amendment, the disputed tax in relation to an assessment year or financial year means the income tax including surcharge and cess (collectively to be referred as 'amount of tax'). It shall be computed in the following manner-
(A) In a case where an appeal, writ petition or SLP is pending before the appellate forum as on 31.01.2020, the amount of tax payable by the appellant shall be the tax effect on the matters involved considering that such appeal or writ petition or SLP will be decided against the assessee.
(B) In a case where the appellate forum has passed its order in an appeal or writ petition on or before 31.01.2020 and the time to file appeal or SLP before higher appellate forum against such order has not expired by 31.01.2020, then the amount of tax payable shall be determined after giving effect to the order so passed.
(C) In a case where an order has been passed by the Assessing Officer on or before 31.01.2020 and the time limit to file an appeal against such order has not expired by 31.01.2020, the amount of tax payable shall be the amount as stated in the order.
(D) In a case where is filed by the assessee before the DRP and the same is pending by 31.01.2020 then the amount of tax payable shall be computed on the proposed variation considering that such variation will be confirmed.
(E) In a case where the DRP has passed the directions but the Assessing Officer has not passed the order by 31.01.2020 then the amount of tax payable shall be computed after giving the effect of the directions in the assessment order.
(F) In a case where a revision petition u/s 264 is pending before the CIT, then the amount of tax payable shall be determined as if the application is rejected by the CIT.
When Demand is enhanced by the CIT(A): It is provided that where the CIT(A) has issued any notice of enhancement u/s 251 on or before 31.01.2020, then the amount of tax payable shall be the disputed tax plus the enhanced tax as per the notice.
When there is a reduction in tax credit: Where the dispute is for reduction of MAT credit u/s 115JAA or AMT credit u/s 115JD then the assessee shall have the option either to pay the amount of tax related to such tax credit along with disputed tax or carry forward the reduced tax credit in the prescribed manner.
When there is a reduction of loss or unabsorbed depreciation: Where the dispute is for reduction of any loss or depreciation then the assessee shall have the option either to pay the amount of tax related to such loss or depreciation along with the disputed tax or carry forward the reduced loss or depreciation in the prescribed manner.
Before the amendment: Prior to the amendment, the method for determining the disputed tax was specified in the Act itself as per the prescribed formula. The formula for determining the disputed tax is omitted in the amended provisions but is shifted to the 'Rules' to be notified later. Further, where notice of enhancement u/s 251 was issued, such cases were not eligible to participate in the scheme. Now they are eligible to avail of this amnesty scheme.
3. Payment of disputed tax in search cases:
[Amendment of section 3]
In search cases where the disputed tax is up to Rs 5 crore, 125 per cent of the disputed tax will have to be paid, if paid by 31st March 2020. This will go up to 135 per cent after March 31.
If the appellant is the income-tax authority or the issue is decided in favour of the assessee, then the percentage will be halved at 62.50% or 67.50%, as the case may be.
Actually, the above-mentioned 125 per cent is splitted into two parts:
(i) 100% of disputed tax
(ii) 25% of disputed tax or Interest & Penalty on disputed tax, whichever is less.
The 25 per cent will be 35 per cent if paid after March 31.
Before the amendment: Search cases were not eligible to participate in the scheme. Now those cases are eligible subject to the condition that amount of disputed tax shall not exceed Rs. 5 crore.
4. New quantum for payment of disputed tax proposed:
[Amendment of section 3]
(a) In a case where an appeal or writ petition or special leave petition is filed by the income-tax authority on any issue then the amount of tax payable shall be 50 per cent of the disputed tax on such issue.
(b) In a case where an appeal is pending before any appellate forum on an issue which is already decided in the assessee's favour in his own case in an earlier year(s) by the higher appellate forum then the amount of tax payable shall be 50 percent of the disputed tax on such issue.
(b) In a case where an appeal is pending before any appellate forum on an issue which is already decided in the assessee's favour in his own case in an earlier year(s) by the higher appellate forum then the amount of tax payable shall be 50 percent of the disputed tax on such issue.
Before the amendment: Prior to the amendment, the full 100 percent of the disputed tax was required to be paid in the specified circumstances. Now the payment of disputed tax in such cases reduced to 50 percent.
5. Appeal to be withdrawn after the issue of certificate:
[Amendment of section 4]
The amendment proposed that the pending appeals or writ petition or SLP before the High Court or Supreme Court or pending arbitration proceedings shall be required to be withdrawn after the issue of the certificate u/s 5(1) and shall furnish the proof of such withdrawal along with payment proof (challan).
Before the amendment: Prior to the amendment, such appeal or writ petition or SLP or arbitration proceedings, etc. was required to be withdrawn before the filing of declaration and proof of such withdrawal shall be required to be submitted along with the declaration filed. Now, the same are required to be withdrawn after the issue of the certificate by the designated authority. It means such withdrawal is not required before filing of the declaration. Issuance of certificate is a step of the procedure that comes after the filing of the declaration.
6. Filing of declaration does not amount to acceptance of the disputed issue:
[Amendment of section 5]
It is clarified that participation in this scheme shall not be construed as precedence and does not mean that the assessee or the income tax authority has accepted the disputed issue.
Before the amendment: Prior to the amendment, there was no such clarification.
7. Refund of tax already paid:
[Amendment of section 7]
It has been clarified that if any amount of tax arrear has been paid by the assessee in excess of the amount payable under this scheme as per section 3, then such excess amount will be refunded to him as per the provisions of the Income Tax Act, 1961 without any interest under section 244A of the Income Tax Act.
Before the amendment: Prior to the amendment, there was no such clarification.
This clarification only clarifies the position where the demand amount is paid in excess of the amount payable under this scheme. it does not clarify whether the demand amount already paid will be adjusted with the amount payable under this scheme or not. Whether an assessee is required to pay the full disputed tax under this scheme without any adjustment for the taxes already paid. It appears that the rules will clarify the position.
Nevertheless, such excess payment of taxes will be separately refunded to the assessee and that too without any interest.
Furthermore, no time limit is prescribed within which the amount will be refunded by the income tax department. In the absence of any interest liability, there may be a possibility of an indefinite delay in issuing the refund.
8. Ineligibility criteria modified:
[Amendment of section 9]
Certain cases are excluded from availing this scheme which is specified in section 9 of The Direct Tax Vivad se Vishwas Bill, 2020.
The amendment has modified two existing clauses of section 9 which are as follows-
(i) In search and seizure cases and the amount of tax dispute exceeds Rs. 5 crore. The limit of disputed tax of Rs 5 crore will be computed on a yearly basis.
(ii) Cases where notice of enhancement u/s 251 is issued, is removed from the list of ineligibility.
(ii) Cases where notice of enhancement u/s 251 is issued, is removed from the list of ineligibility.
Before the amendment: Prior to the amendment, search and seizure cases were ineligible to participate in the scheme. Such cases are now allowed if the disputed tax does not Rs. 5 crore. Above Rs. 5 crore cases are still ineligible to participate in the scheme.
Further, cases where the CIT(A) has issued and a notice of enhancement u/s 251 is issued on or before 31.01.2020 were excluded from this scheme. With the omission of this clause, these cases are now eligible to participate. In this case, the enhanced amount of tax is required to be paid along with the disputed tax.
9. Modifying the provisions related to offences under any other law:
[Amendment of section 9]
The restriction on a person against whom enforcement of any civil liability is instituted by any law enforcing agency is relaxed and in the amendment, it is limited to income tax authority only.
A new provision is inserted under which if any prosecution has been initiated against any person by an Income-tax authority for any offence punishable under the Indian Penal Code or for the purpose of enforcement of any civil liability under any law on or before the filing of the declaration, such person cannot make any declaration under this amnesty scheme.
The ineligibility shall be applicable in a case where such a person is convicted consequent to the prosecution initiated by an Income-tax authority.
10. Power to make rules expanded:
[Amendment of section 12]
The method of determining the disputed tax shall be notified in the rules to be notified later. The method shall also prescribe the manner of set-off of brought forward MAT credit and AMT credit and carry forward thereof. The rules shall also specify the manner of set-off of brought forward or carry forward of business loss or unabsorbed depreciation.
Further, the Rules shall provide the manner of calculating the amount payable under this scheme.
The above provisions are the proposed changes introduced by way of amendment in The Direct Tax Vivad se Vishwas Bill, 2020. These amendments were introduced even before the law is enacted. The bill aims at reducing litigations in the direct taxes payments.
Read the full text of the amendments in The Direct Tax Vivad Se Vishwas Bill, 2020 under Vivad se Vishwas Scheme.
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S. No
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Text of amendments
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Clause number
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1.
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Page 1, for lines
4-6, substitute ––
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2
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43
of 1961.
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‘(a) “appellant” means ––
(i)
a person in whose case an appeal or a writ petition or special leave petition
has been filed either by him or by the income-tax authority or by both,
before an appellate forum and such appeal or petition is pending as on the
specified date;
(ii)
a person in whose case an order has been passed by the Assessing Officer, or
an order has been passed by the Commissioner(Appeals) or the Income Tax
Appellate Tribunal in an appeal, or by the High Court in a writ petition, on
or before the specified date, and the time for filing any appeal or special
leave petition against such order by that person has not expired as on that
date;
(iii)
a person who has filed his objections before the Dispute Resolution Panel
under section 144C of the Income-tax Act, 1961 and the Dispute Resolution
Panel has not issued any direction on or before the specified date;
(iv)
a person in whose case the Dispute Resolution Panel has issued direction
under sub-section (5) of section 144C of the Income-tax Act and the Assessing
Officer has not passed any order under sub-section (13) of that section on or
before the specified date;
(v)
a person who has filed an application for revision under section 264 of the
Income-tax Act and such application is pending as on the specified date;”
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2.
43
of 1961.
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Page 2, for lines
19-50, substitute ––
(j)
“disputed tax”, in relation to an assessment year or financial year, as the
case may be, means the income-tax, including surcharge and cess(hereafter in
this clause referred to as the amount of tax) payable by the appellant under
the provisions of the Income-tax Act, 1961, as computed hereunder:-
(A)
in a case where any appeal, writ petition or special leave petition is
pending before the appellate forum as on the specified date, the amount of
tax that is payable by the appellant if such appeal or writ petition or
special leave petition was to be decided against him;
(B)
in a case where an order in an appeal or in writ petition has been passed by
the appellate forum on or before the specified date, and the time for filing
appeal or special leave petition against such order has not expired as on
that date, the amount of tax payable by the appellant after giving effect to
the order so passed;
(C)
in a case where the order has been passed by the Assessing Officer on or
before the specified date, and the time for filing appeal against such order
has not expired as on that date, the amount of tax payable by the appellant
in accordance with such order;
(D)
in a case where objection filed by the appellant is pending before the
Dispute Resolution Panel under section 144C of the Income-tax Act as on the
specified date, the amount of tax payable by the appellant if the Dispute
Resolution Panel was to confirm the variation proposed in the draft order;
(E)
in a case where Dispute Resolution Panel has issued any direction under
sub-section (5) of section 144C of the Income-tax Act and the Assessing
Officer has not passed the order under sub-section (13) of that section on or
before the specified date, the amount of tax payable by the appellant as per
the assessment order to be passed by the Assessing Officer under sub-section
(13) thereof;
(F)
in a case where an application for revision under section 264 of the
Income-tax Act is pending as on the specified date, the amount of tax payable
by the appellant if such application for revision was not to be accepted:
Provided
that in a case where Commissioner (Appeals) has issued notice of
enhancement under section 251 of the Income-tax Act on or before the
specified date, the disputed tax shall be increased by the amount of tax
pertaining to issues for which notice of enhancement has been issued:
Provided
further that in a case where the dispute in relation to an assessment year
relates to reduction of tax credit under section 115JAA or section 115D of
the Income-tax Act or any loss or depreciation computed thereunder, the
appellant shall have an option either to include the amount of tax related to
such tax credit or loss or depreciation in the amount of disputed tax,or to
carry forward the reduced tax credit or loss or depreciation,in such manner
as may be prescribed.
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2
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3.
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Page 3,omit lines 1-3.
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2
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4.
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Page 3, after line
41, insert ––
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3
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5.
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Page 3, after line
45, insert ––
“Provided
that in a case where an appeal or writ petition or special leave petition is
filed by the income-tax authority on any issue before the appellate forum,
the amount payable shall be one-half of the amount in the Table above
calculated on such issue, in such manner as may be prescribed:
Provided
further that in a case where an appeal is filed before the Commissioner
(Appeals) or objections is filed before the Dispute Resolution Panel by the
appellant on any issue on which he has already got a decision in his favour
from Income Tax Appellate Tribunal (where the decision on such issue is not
reversed by the High Court or the Supreme Court) or the High Court (where the
decision on such issue is not reversed by the Supreme Court), the amount
payable shall be one-half of the amount in the Table above calculated on such
issue, in such manner as may be prescribed:
Provided
also that in a case where an appeal is filed by the appellant on any issue
before Income Tax Appellate Tribunal on which he has already got a decision
in his favour from the High Court (where the decision on such issue is not
reversed by the Supreme Court), the amount payable shall be one-half of the
amount in the Table above calculated on such issue, in such manner as may be
prescribed.”.
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3
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6.
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Page 4, for lines
8-18, substitute ––
“(3)
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 arrear, he shall withdraw such appeal or writ petition with
the leave of the Court wherever required after issuance of certificate under
sub-section (1) of section 5 and furnish proof of such withdrawal alongwith
the intimation of payment to the designated authority under sub-section (2)
of section 5.
(4)
Where the declarant has initiated any proceeding for arbitration,
conciliation or mediation, or has given any notice thereof under any law for
the time being in force or under any agreement entered into by India with any
other country or territory outside India whether for protection of investment
or otherwise, he shall withdraw the claim, if any, in such proceedings or
notice after issuance of certificate under sub-section (1) of section 5 and
furnish proof of such withdrawal alongwith the intimation of payment to the
designated authority under sub-section (2) of section 5.”
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4
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7.
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Page 5, after line
5, insert––
“Explanation.––
For the removal of doubts, it is hereby clarified that making a declaration
under this Act shall not amount to conceding the tax position and it shall
not be lawful for the income-tax authority or the declarant being a party in
appeal or writ petition or special leave petition to contend that the
declarant or the income-tax authority, as the case may be, has acquiesced in
the decision on the disputed issue by settling the dispute.”.
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5
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8.
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Page 5, after line
10, insert––
“Explanation.–– For
the removal of doubts, it is hereby clarified that where the declarant had,
before filing the declaration under sub-section (1) of section 4, paid any
amount under the Income-tax Act in respect of his tax arrear which exceeds
the amount payable under section 3, he shall be entitled to a refund of such
excess amount, but shall not be entitled to interest on such excess amount
under section 244A of the Income-tax Act.”.
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7
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9.
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Page 5, for lines
17-19, substitute ––
“(i)
relating to an assessment year in respect of which an assessment has been
made under sub-section (3) of section 143 or section 144 or section 153A or
section 153C of the Income-tax Act on the basis of search initiated under
section 132 or section 132A of the Income-tax Act, if the amount of disputed
tax exceeds five crore rupees;”.
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9
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10.
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Page 5, omit lines 27-29
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9
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11.
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Page 6, for lines
6-12, substitute ––
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9
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37
of 1967.
61
of 1985.
49
of 1988.
15
of 2003.
45
of 1988.
45
of 1860.
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“(c)
to any person in respect of whom prosecution for any offence punishable under
the provisions of the Unlawful Activities (Prevention) Act, 1967, the
Narcotic Drugs and Psychotropic Substances Act, 1985, the Prevention of
Corruption Act, 1988, the Prevention of Money Laundering Act, 2002, the
Prohibition of Benami Property Transactions Act, 1988 has been instituted on
or before the filing of the declaration or such person has been convicted of
any such offence punishable under any of those Acts;
(ca)
to any person in respect of whom prosecution has been initiated by an
Income-tax authority for any offence punishable under the provisions of the
Indian Penal Code or for the purpose of enforcement of any civil liability
under any law for the time being in force, on or before the filing of the
declaration or such person has been convicted of any such offence consequent
to the prosecution initiated by an Income-tax authority;”
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12.
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Page 6, after line
42, insert––
“(da)
determination of disputed tax including the manner of set-off in respect of
brought forward or carry forward of tax credit under section 115JAA or
section 115JD of the Income-tax Act or set-off in respect of brought forward
or carry forward of loss or allowance of depreciation under the provisions of
the Income-tax Act;
(db) the manner of calculating the
amount payable under this Act.”.
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12
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