Direct Tax Disputes Resolution Bill passed in the Lok Sabha

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Scope of the Scheme enhanced

Originally the Scheme could only be availed by those taxpayers who have any appeal (whether filed by taxpayers or by tax authorities) pending before Appellate Forum as on 31 January 2020. Now, the following cases are also eligible for resolution under this Scheme.

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Taxpayers in whose case, orders have been passed by the tax authorities or CIT(A) or ITAT or High Court and the time limit for filing appeal against such orders has not expired as on 31 January 2020;

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Cases pending before ‘Dispute Resolution Panel’ (DRP) as on 31 January 2020;

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Cases where DRP has issued directions and the tax authorities have not passed any final order on or before 31 January 2020;

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Cases where revision petition has been filed before the Commissioner of Income-tax by the taxpayers and the same is pending as on 31 January 2020; and

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Search cases where the amount of disputed tax doesn’t exceed INR 50 million.

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Change in ‘Disputed tax’ definition

The revised formula for computing ‘disputed tax’ is as under:

1.        

Appeal, writ petition or special leave petition pending before an Appellate Forum

Tax payable if such appeal, writ petition or special leave petition was to be decided against the taxpayers

2.        

Order in an appeal or in writ petition has been passed by High Court/ITAT/CIT(A) and the time limit for filing further appeal has not expired

Tax payable after giving effect to the order so passed

3.        

Order has been passed by the tax authorities and the time limit for filing appeal against such order has not expired 

Tax payable in accordance with such order

4.        

Objections filed before DRP are pending

Tax payable if DRP was to confirm proposed variation in the draft order

5.        

DRP has issued the directions and the tax authorities are yet to pass the final order

Tax payable as per the final order to be passed by the tax authorities

6.        

Revision petition filed under section 264 is pending 

Tax payable if such revision petition was not to be accepted 

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Options available to taxpayers for set off/ carry forward of ‘Minimum Alternate Tax’ (MAT) credit or any loss or depreciation

With respect to cases where tax dispute pertains to reduction in MAT credit, unabsorbed losses or depreciation, the taxpayers will now have an option to either:

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Include the amount of tax related to such MAT credit or losses or depreciation in the amount of disputed tax; or

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Carry forward the reduced MAT credit or losses or depreciation in such manner as may be prescribed. 

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Other key changes

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Now the taxpayers are required to submit proof of withdrawal of appeal or claim made in arbitration/conciliation/mediation at the time of making payment of amount determined under the Scheme;

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It has been clarified that making a declaration under this Scheme will not set any ‘precedent’ for subsequent proceedings of the taxpayers; and

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Taxpayers will now be entitled to get refund of excess amount paid under Income-tax Act in respect of his tax arrears which exceed the amount of disputed tax computed under the Scheme. However, no interest will be paid by Government on such excess tax payment.

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Amount that needs to be paid under the Scheme

Nature of tax demand

Amount payable under the Scheme on or before 31 March 2020

Amount payable under the Scheme after 31 March 2020 but on or before the last date of the Scheme

Tax demand raised pursuant to any assessment order (except orders passed pursuant to search action)

Amount of disputed tax. Taxpayer will get complete waiver from interest or penalty leviable or levied

Lower of the following:

110% of the disputed tax

OR

Disputed tax, plus applicable interest, penalty

Disputed interest / disputed penalty / disputed fee

25% of the disputed interest / disputed penalty / disputed fee

30% of the disputed interest / disputed penalty / disputed fee

Tax demand raised pursuant to assessment orders passed under search action

Lower of the following:

125% of the disputed tax

OR

Disputed tax, plus applicable interest, penalty

Lower of the following:

135% of the disputed tax

OR

Disputed tax, plus applicable interest, penalty

Note: In the following instances, taxpayers would only be required to pay 50% of the disputed tax/disputed interest/disputed penalty/disputed fee:

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Who / what is not eligible for the Scheme

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Following tax disputes would not be eligible for this Scheme:

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Appeals against assessment orders passed pursuant to ‘search’ action if the disputed tax amount exceeds INR 50 million;

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Appeals against assessment orders involving undisclosed foreign income and foreign assets;

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Appeals against assessments or reassessment orders made pursuant to ‘Exchange of information’ received from foreign jurisdictions; and

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Appeals where ‘prosecution’ has been instituted on or before the date of filing of Declaration.

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Taxpayers in respect of whom prosecution for any offence punishable under inter alia the Indian Penal Code (initiated by Income tax authorities); Prevention of Money Laundering Act, 2002; the Prohibition of Benami Property Transactions Act, 1988 etc has been instituted on or before the filing of Declaration, are also not eligible for the Scheme.