from India Tax & Regulatory Services
CBDT issues clarifications on Direct Tax Dispute Resolution Scheme
September 19, 2016
In brief
The Central Board of Direct Taxes (CBDT) has issued clarifications3 in relation to the Direct Tax Dispute Resolution Scheme (the Scheme), introduced vide Finance Act, 2o16, in the form of Frequently Asked Questions (FAQs), in an attempt to address queries faced by taxpayers while assessing eligibility for the Scheme.
In detail
Background The Finance Minister
introduced the Scheme in the Act, with a two-fold objective – (a) fast-track pending
litigation; (b) providing an opportunity to taxpayers affected by retrospective
amendments to settle their pending litigation.
This is a one-time scheme, and taxpayers can opt for it
between 1 June 2016 and 31 December 20161. The Direct Tax Dispute Resolution Scheme Rules, 2016 (the Rules) were also notified,2 prescribing the Rules
applicable for availing this Scheme.
Given the above, while assessing the eligibility of the Scheme, taxpayers faced various open questions. In order to address these queries/ issues, the Government has recently issued certain clarifications3 in the form of FAQs.
FAQ(s) issued by CBDT
CBDT has issued the following FAQ(s):
FAQ
No. Query Clarification
1 Appeal disposed off before filing declaration
Is the Scheme applicable where appeal was pending before Commissioner of Income-tax (Appeals) [CIT(A)] on 29 February 2016 but was subsequently disposed off, before making the declaration under the Scheme.
Declaration cannot be filed where CIT(A) has disposed the case off before making the declaration.
1 Notification No. 34/2016 dated 26 May 2016
2 Notification No. 35/2016 dated 26 May 2016. Please refer our News Alert dated 1 June 2016 in this regard.
3 Circular No. 33/2016 dated 12 September 2016
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No. Query Clarification
2 Power of CIT(A) to dispose an appeal Can the CIT(A) dispose off the appeal where the appellant has filed a declaration under the Scheme, or has intimated the CIT(A) of his intention to file the declaration under the Scheme?
Appeals are not to be disposed off where the taxpayer has intimated CIT(A) of availing this Scheme, or has filed a declaration under this Scheme4.
Further, designated authority has to obtain an
endorsement from the requisite CIT(A) that the appeal was pending on 29 February 2016, and has not yet been disposed.
3 Penalty appeal related to quantum appeal Appeal against quantum as well as penalty under section 271(1)(c) of the Income-tax Act, 1961 (the Act) is pending before the CIT(A). If taxpayer files a declaration in respect of the quantum appeal under the Scheme, what would be the fate of penalty appeal?
As per the scheme, if the disputed tax is less than INR 10 lakhs, then penalty is waived. If it is more than INR 10 lakhs, the taxpayer has to pay 25% of the minimum penalty. Accordingly, in case of a valid declaration, the pending penalty appeal is deemed to be withdrawn and the penalty or the balance amount of penalty, as the case may be, shall be deemed to be waived.
4 Time of deemed withdrawal of appeal From what time will the appeal pending before the CIT(A) be deemed to be withdrawn, where the taxpayer files a declaration under the Scheme?
Appeal pending before CIT(A) will be deemed to be withdrawn from the date on which the designated authorities issue the prescribed certificate to the taxpayer, stating the sum payable by the taxpayer under this Scheme5.
5 Eligibility in cases of nil disputed tax Is the taxpayer eligible for the Scheme, where returned loss has been reduced during
assessment, no tax liability has been determined and penalty proceedings have been initiated?
Taxpayer is not eligible to avail the scheme for
quantum proceedings, in absence of any disputed tax.
The Scheme may be availed in respect of penalty proceedings pending before the CIT(A) for penalty imposed on variation in the quantum loss.
6 Eligibility in case of delay in filing of appeal condoned by CIT(A)
Due date of filing appeal before CIT(A) expired on 29 February 2016, and appeal was filed on 5 April 2016, with request for condonation of delay.
The CIT(A) condoned the delay in filing of appeal.
Will the taxpayer be eligible for the Scheme?
Taxpayer will be eligible for the Scheme where:
i. Time limit for filing of appeal is barred by limitation on or before 29 February 2016;
ii. Appeal and condonation application has been filed before Commissioner (Appeals) before 1 June 2016; and
iii. Delay in filing of such appeal is condoned by the Commissioner (Appeals).
Therefore, in the example, the taxpayer would be eligible for the Scheme.
7 Notice of enhancement
Is the taxpayer eligible where the CIT(A) has issued notice of enhancement.
Where such a notice is received before 1 June 2016, the taxpayer will not be eligible for the Scheme.
8 Reassessment post survey
Survey was conducted in financial year 2013-14.
Documents relating to assessment year 2011-12 were found, based on which reassessment was conducted. This is now pending before CIT(A).
Is the taxpayer eligible for the Scheme?
Taxpayer is not eligible to avail the Scheme.
Section 208(a)(ii) of the Act, restricts applicability of the Scheme where assessment or reassessment in respect of which survey was conducted under section 133A of the Act has a bearing.
4 Instruction No F.No.279/Misc./M-30/2016 dated 30 March 2016
5 As provided in section 204(1) of the Act
FAQ
No. Query Clarification
9 Amount payable where quantum appeal is pending before higher appellate authorities
Quantum appeal is pending before higher appellate authorities and related penalty proceedings are pending before CIT(A).
How would the amount payable under the Scheme be determined?
In relation to the penalty proceedings eligible under the Scheme, the amount payable under the Scheme shall be calculated on the ‘total income’ determined after giving effect to the last appellate order passed on or before the date of filing of declaration under the Scheme
Any variation to the total income as a result of an appellate order passed after the date of declaration will be ignored.
10 Same amount taxed in hands of two persons
Where certain income has been charged to tax in the hands of two different persons, or has been taxed in the hands of the same person in two different years, one on substantive basis and the other on the protective basis, who, and when, will taxpayer be eligible for the Scheme?
Taxpayers should make declarations where additions are made on substantive basis. The protective demand is not subjected to recovery unless it is finally upheld.
Once the declaration in a substantive case or year is accepted, tax arrears in protective case/ year would no longer be valid and will be rectified by suitable orders in the normal course.
11 Applicability of declaration under Scheme on pending litigation of other years
By filing declaration under the Scheme for one assessment year, does the taxpayer forego the right to appeal on the same issue in another assessment year?
No, the order under the Scheme does not decide any judicial issue. It only determines the sum payable under the Scheme, and provides for a dispute resolution mechanism in respect of cases for which declaration has been made.
12 Relief on account of non-payment within prescribed due date
Is relief available where taxpayer is unable to pay the amount determined under the Scheme within the prescribed due date6 for any reason, including non-realisation of cheque presented for payment?
No relief shall be provided
13 Time limit for intimation of payments under Scheme
Section 204(2) does not prescribe any time limits for intimation of payments made by the taxpayer under the Scheme.
Taxpayer is required to intimate details of the payment made, along with proof, within one month from the date on which time limit for making payment under the Scheme expires.
Subsequently, the designated authority shall pass the order stating that the amount has been paid by the taxpayer7 under the scheme, within one month from the end of the month in which intimation regarding payment is received.
14 Refund of excess penalty payments Where taxpayer has paid penalty as per section 271(1)(c) of the Act, and taxpayer opts for the Scheme, will refund be granted where such payments exceed penalty payable under the Scheme?
The taxpayer shall be eligible for refund of the excess amount. However, the taxpayer shall not be eligible for interest on such refund.
6 As per Section 204(2) of the Act, taxpayer is required to pay the amount determined under the Scheme, within 30 days of the receipt of the Certificate
7 Section 204(2) of the Act
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The takeaways
The clarifications provided by CBDT should help taxpayers assess the applicability of the Scheme so that they can make an informed decision about opting for this Scheme.
However, certain issues remain open, such as eligibility of cases covered under retrospective amendments that are clarificatory in nature, conditions where the declaration would be considered wrong etc. The Government ought to consider resolving these
queries in order to boost the successful implementation of the Scheme.
Let’s talk
For a deeper discussion of how this issue might affect your business, please contact your local PwC advisor.
For private circulation only
This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PwCPL, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. Without prior permission of PwCPL, this publication may not be quoted in whole or in part or otherwise referred to in any documents.
© 2016 PricewaterhouseCoopers Private Limited. All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers Private Limited (a limited liability company
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