In what would make the proposed direct tax dispute resolution scheme - Vivad Se Vishwas - more attractive to a section of taxpayers, the government has said assessees could pay just half the tax amount sans penalty and interest if she had won the case at a particular forum and the taxman's appeal is being heard at the higher forum.
According to an amendment moved in Lok Sabha to the relevant Bill, if the dispute is related to only penalty and interest in such cases where the latest ruling is in favour of the taxpayer, the taxpayer has to pay only 12.5% of the disputed penalty/interest amount. Of course, the leniency will apply only if payments made before March 31.
This contrasts with disputes where the department has won the case in a lower forum and the assessee has appealed. In such cases, as reported earlier, a taxpayer has to pay 100% of the disputed tax (125% of disputed tax in case of search cases) while penalty and interest would be waived off. If the dispute is only about penalty and interest, then 25% of the disputed penalty and interest is payable.
Interacting with the industry in Bangalore on Monday, revenue secretary Ajay Bhushan Pandey clarified that if a taxpayer has paid an upfront amount to enter into a litigation on a dispute, the amount would be set off against the final payment under the scheme. Under the income tax rules, an assessee has to deposit 20% of the demand for a stay on assessment order from CIT (Appeals).
Experts said that the amendments suggest that the government is exploring all options to make this scheme a success as this would attract higher participation from taxpayers and boost tax receipts in March quarter.
Amit Maheshwari, partner, Ashok Maheshwary & Associates LLP, said: "Amendments related to option of paying 50% of disputed tax when the department has filed an appeal and refund of excess tax paid before filing declaration are indeed welcome amendments and would further boost the appeal of this scheme." He added that the requirement to furnish proof of withdrawal of the case before issuance of final certificate instead of at the time of filing the declaration would provide some ease to taxpayers.
However, Kuldip Kumar, tax partner at PwC India, said that for a taxpayer who has won a dispute against the department might not always find paying 50% of demand lucrative enough as the assessee's chances of favourable order improves drastically beyond CIT (Appeals). He added that the scheme should have offered an even lower liability which could be compared favourably against the potential litigation cost of the assessee.
The scheme is meant for 4.83 lakh direct tax-related disputes for which appeals are pending at various levels. Tax arrears to the tune of about Rs 9.32 lakh crore are locked up in these appeals as on November 31, 2019.
The scheme, however, is designed to ensure taxpayers avail of it before March 31 as it becomes less attractive after the deadline even though it would remain open.
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 previous round. The amount would be 15% of the disputed penalty, interest or fee in case appeals are related to disputed penalty, interest or fee only.
Similarly, for cases won by department earlier but payment is 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.