In an effort to address the burgeoning issue of tax disputes and litigation in India, the Direct Tax Vivad se Vishwas Act, 2020 was introduced. This landmark legislation aims to provide a one-time opportunity for taxpayers to settle their disputes with the Income Tax Department, thereby reducing the burden on both taxpayers and the judicial system. The subsequent introduction of the Direct Tax Vivad se Vishwas Rules, 2024 further clarifies and streamlines the process for taxpayers seeking to take advantage of this scheme.
KEY FEATURES OF DIRECT TAX VIVAD SE VISHWAS ACT, 2020:
Eligibility Criteria:
The Act applies to taxpayers with disputes pending as of the cut-off date, specifically for assessment years up to 2019-20. It includes cases where appeals are pending before the Income Tax Appellate Tribunal (ITAT), High Courts, or the Supreme Court.
Settlement Benefits:
Taxpayers who opt for this scheme can settle their disputes by paying the disputed tax amount along with specified interest, but they are exempt from paying penalties. This significantly lowers the financial burden and provides a clear pathway to resolution.
Timeline and Extensions:
Initially valid until March 31, 2021, the scheme has seen extensions due to the challenges posed by the COVID-19 pandemic, allowing more taxpayers to utilize its provisions.
Exclusions:
Certain cases are excluded from this scheme, including those involving prosecution, fraud, or misrepresentation. Taxpayers in such situations cannot benefit from the provisions of the Act.
APPLICATION PROCESS:
The introduction of the Direct Tax Vivad se Vishwas Rules, 2024 has provided a detailed framework for implementing the provisions of the 2020 Act. These rules are crucial for ensuring a smooth process for taxpayers looking to settle their disputes. Taxpayers must submit an application in Form 1, detailing their case and the disputed amounts. The rules clarify the documentation required for a successful submission. The Designated Authority shall issue a certificate electronically in Form-2.
This structured approach facilitates better organization and processing of applications.
Timelines for Processing: The rules establish specific timelines for the processing of applications and the issuance of necessary certificates. This ensures that disputes are resolved in a timely manner, alleviating the prolonged uncertainty faced by taxpayers.
Resolution and Closure: Upon acceptance of the application, the disputed amount is considered resolved. The tax authorities are required to issue a certificate confirming the settlement, providing a clear conclusion to the dispute for the taxpayer.
Intimation of Payment: The intimation of payment made pursuant to the certificate issued by the designated authority shall be furnished along with proof of withdrawal of appeal, objection, application, writ petition, special leave petition, or claim filed by the declarant to the designated authority in Form-3.
Order by designated authority: The order by the designated authority in respect of payment of amount payable by the declarant as per the certificate shall be in Form-4.
How to calculate disputed taxes when losses or unclaimed depreciation are reduced?
If there’s a disagreement about reducing a loss or unclaimed depreciation that can be carried forward, the person involved can choose to:
- Include the tax (plus any extra charges) on the amount of the reduction as disputed tax and still carry forward the full loss or unclaimed depreciation.
- Carry forward the reduced amount of loss or unclaimed depreciation.
If the person chooses the second option, they will have to pay tax (plus extra charges) and any interest on the reduced loss or unclaimed depreciation in future years. However, the value of the asset will not increase by the amount that was reduced. Additionally, when calculating the reduced amount to carry forward, only half of the reduction will be considered if it relates to issues that were decided in favor of the person.
How to calculate disputed taxes when Minimum Alternate Tax (MAT) credit is reduced?
If there’s a disagreement about reducing the MAT credit that can be carried forward, the person involved can choose to:
- Include the reduced amount of MAT credit as part of the disputed tax and carry forward the full MAT credit.
- Carry forward the reduced MAT credit.
If the person chooses the second option, they will have to pay tax (plus any extra charges) and any interest on the reduced MAT credit in future years. However, when calculating the reduced MAT credit to carry forward, only half of the reduction will be considered if it relates to issues that were decided in the person’s favor.
DIRECT TAX VIVAD SE VISHWAS SCHEME, 2024
A measure introduced recently to reduce pending litigation, these measures on the Direct tax and Indirect tax front are expected to significantly reduce the burden of tax litigation and expedite the resolution of tax disputes. Building on the foundational work of the 2020 Act and the 2024 rules, the Direct Tax Vivad se Vishwas Scheme, 2024 is aimed at further enhancing the dispute resolution process. The updated scheme offers several advantages:
Expanded Scope of Eligibility – The scheme may broaden the eligibility criteria, potentially allowing for more recent assessment years to be included, thus attracting a wider range of taxpayers
Transparency and Clarity – With clearer guidelines and defined timelines, the scheme emphasizes transparency, making it easier for taxpayers to understand their rights and obligations.
Flexible Payment Options – The scheme outlines various methods for making payments, including online facilities, which enhance compliance convenience for taxpayers.
Educational Outreach – To improve awareness and facilitate better understanding, the government has initiated outreach programs. These programs aim to educate taxpayers about the scheme’s benefits and the procedural requirements for availing themselves of it.
This Scheme also does not apply in the following cases:
- For tax arrears related to:
- An assessment year where an assessment was done based on a search under certain sections of the Income-tax Act.
- An assessment year where legal action has started before the declaration was filed.
- Any undisclosed income or assets located outside India.
- An assessment or reassessment based on information from international agreements, if it involves tax arrears.
- For any person who has been detained under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974, before the declaration was filed, unless:
- The detention order has not been canceled based on a report from the Advisory Board.
- The detention order has not been canceled before the review period ends or based on the Advisory Board’s report.
- The detention order has not been canceled before the review period for the first review or based on the Advisory Board’s report.
- If the detention order has not been canceled by a court with proper authority.
- For anyone who is facing legal action for offenses under certain laws, such as:
- The Unlawful Activities (Prevention) Act, 1967
- The Narcotic Drugs and Psychotropic Substances Act, 1985
- The Prohibition of Benami Property Transactions Act, 1988
- The Prevention of Corruption Act, 1988
- The Prevention of Money-laundering Act, 2002
This applies if the legal action started before the declaration was filed or if the person has been convicted of such offenses. - For anyone facing legal action from an income-tax authority for offenses under the Bharatiya Nyaya Sanhita, 2023, or for any civil liabilities under current laws, if this action began before the declaration was filed or if the person has been convicted of such offenses
- For anyone listed under section 3 of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992, before the declaration was filed.
CONCLUSION:
The Direct Tax Vivad se Vishwas Act, 2020, along with the 2024 Rules and Scheme, represents a significant step forward in resolving tax disputes in India. By offering a structured, efficient, and financially beneficial way to settle disputes, the government aims to foster a cooperative relationship between tax authorities and taxpayers.
Taxpayers are encouraged to stay informed about the provisions and updates related to this scheme, as it provides a vital opportunity to resolve disputes amicably. In a landscape often marked by complexity and uncertainty, the Direct Tax Vivad se Vishwas initiative stands out as a beacon of hope for enhancing taxpayer experience and streamlining tax administration in India.
Disclaimer
The information provided in this article is intended for general informational purposes only and should not be construed as legal advice. The content of this article is not intended to create and receipt of it does not constitute any relationship. Readers should not act upon this information without seeking professional legal counsel.
