India tax litigation settlement scheme: The Direct Tax Vivad se Vishwas Act, 2020 - Deloitte
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India tax litigation settlement scheme: The Direct Tax Vivad se Vishwas Act, 2020 18 March 2020
Presenters
Government representatives Subject matter experts
Karishma Phatarphekar
Mr. S K Gupta
L N Pant
Ms. Geetha Ravichandran
Vijay Dhingra
© 2020 Deloitte Touche Tohmatsu India LLP 2Agenda • Background • Government’s perspective – speaker’s view • Overview & Procedural aspects • Key business considerations • Panel discussion • Way forward • Questions and answers © 2020 Deloitte Touche Tohmatsu India LLP 3
Background © 2020 Deloitte Touche Tohmatsu India LLP 4
Background
• The Direct Tax Vivad • Aimed to reduce
se Vishwas Act, 2020 litigation – settlement
is enacted on 17 mechanism not an
March 2020 amnesty
• 55 FAQs released
• Rules awaited
Penalty Prosecution
Interest Finality
• First window: • Completely online
until 31 March portal to be activated
• Second from 1 April to with central monitoring
30 June
© 2020 Deloitte Touche Tohmatsu India LLP 5Government’s perspective Speaker’s view © 2020 Deloitte Touche Tohmatsu India LLP 6
Polling question #1
Do you think the time limit of March 31st is practically feasible
for you to consider the scheme
a. Yes
b. No – Too short a time to take a decision
c. No - Arranging funds an issue
d. No – Both the above reasons
© 2020 Deloitte Touche Tohmatsu India LLP 7Overview and procedural aspects © 2020 Deloitte Touche Tohmatsu India LLP 8
Eligibility
• Appeal/petition should be pending as on 31 Jan 2020 before any appellate
Forums
1 • Appellate Forum means Supreme Court, High Court, Income-tax
Appellate Tribunal, or Commissioner (Appeals)
2 • Scheme is also applicable to following disputes where as on
31 January 2020
– Time limit for filing an appeal has not expired
3 – Matters pending before Dispute Resolution Panel (DRP) or where
DRP directions have been passed but final assessment order is
awaited
– Revision petitions are pending before Commissioner of Income
4 Tax
– TDS related dispute resolution
5 – Search cases where disputed tax is less than INR 50 million
• Matters involving arbitration, conciliation or mediation are also
eligible (based on international agreements)
No provisions in the scheme to settle part of a pending dispute in relation to an
appeal/petitions
© 2020 Deloitte Touche Tohmatsu India LLP 9“Amount payable” in respect of “tax arrears”
Disputes only interest,
Search cases Other than search cases
penalty or levy
Amount to be paid on or before 31 March 2020
• Lower of • 100 percent of the disputed tax • 25 percent of disputed interest
/disputed penalty/disputed fee
– 125 percent of disputed tax;
or
– 100 percent of disputed tax
plus interest and penalty on
such disputed tax
Amount to be paid post 31 March 2020
• Lower of • Lower of • 30 percent of disputed interest
/disputed penalty/ disputed fee
– 135 percent of disputed tax; – 110 percent of disputed tax;
or or
– 100 percent of disputed tax – 100 percent of disputed tax
plus interest and penalty on plus interest and penalty on
such disputed tax such disputed tax
Last date of the scheme to be notified by the Government
(30 June 2020 as per FMs budget speech)
Disputed tax, in relation to an assessment year, is essentially tax on disputed income
© 2020 Deloitte Touche Tohmatsu India LLP 10“Amount payable” in respect of “tax arrears” (Cont’d)
Department appeal, loss situation, MAT credit situation
• In case of Assessee’s appeal covered in its own decision before higher
forum or in case of department’s appeal, the percentage of tax arrears
payable would be 50% of the tax arrears
• In case of a situation where the taxpayer has taxable losses, the taxpayer
shall have an option to
– Either pay the notional tax on amount determined and carry forward the
losses without reducing them; or
– Settle by accepting the reduced carry forward of loss (on account
of the disputed amount) without making any payment
• Same mechanism would apply for reduction in MAT credit
© 2020 Deloitte Touche Tohmatsu India LLP 11Scheme not to apply to certain cases
• Tax arrear on account of
– Assessment made as a result of search and seizure and disputed tax
amount exceeds INR 50 million
– Prosecution initiated before filing declaration
– Undisclosed foreign income/assets
– Information received as per section 90 or section 90A of the
Income-tax, Act 1961
• Order passed under conservation of foreign exchange and
prevention of smuggling activities
• Prosecution for any offence punishable under certain acts; or initiated by
the Income- tax authorities under Indian Penal Code for purpose of
enforcement of any civil liability
• Person notified under section 3 of the Special Court Act, 1992 (trial of offences
relating to transactions in securities)
© 2020 Deloitte Touche Tohmatsu India LLP 12Procedure for appeals filed by taxpayer
• Taxpayer to file declaration in specified form
• Taxpayer to furnish an undertaking waiving his right direct or indirect to
seek or pursue any remedy or claim in relation to the tax arrears under
any law
• Designated authority within 15 days to determine the amount payable
by the taxpayer
• Taxpayer to pay the amount determined within 15 days and intimate the
designated authority. Along with it, taxpayer to also submit proof of
withdrawal of such appeal
• Designated authority will then pass an order, which shall be conclusive
as to the matters stated in the declaration
© 2020 Deloitte Touche Tohmatsu India LLP 13Consequences Immunities • Order passed by the designated authority to be conclusive as to matters mentioned therein and such matters cannot be reopened in any other proceedings • No institution of any proceedings in respect of an offence, penalty or interest • Appellate forums/arbitrator, conciliator, or mediator not to decide the issue in respect of cases where an order is passed by the designated authority • Claim of conceding tax position on settling the dispute will not hold good. Thus, the same cannot be considered as a precedent of giving up a tax position © 2020 Deloitte Touche Tohmatsu India LLP 14
Consequences (Cont’d)
Other aspects
• Any amount paid in pursuance of a declaration shall not be refundable
– Except where before making the declaration the appellant had paid in
excess of the amount to be paid under dispute but the refund will be paid
without interest
• Central Board of Direct Taxes (CBDT) may issue directions or orders to
income-tax authorities as it may deem fit – matters of collection, procedure
to be followed as necessary in the public interest, remove difficulties
• No such orders to be made after the expiry of a period of two years from
the date on which the provisions of this Act come into force
© 2020 Deloitte Touche Tohmatsu India LLP 15Key business considerations © 2020 Deloitte Touche Tohmatsu India LLP 16
Critical business considerations
• Cases where • Lends • Compared to • Re-acting in a • Allows tax • Clearance of • In case of
taxpayers certainty to VSV – positive teams to outstanding listed entities,
have made entities consider the manner to the focus on litigation governance
provisions currently factor of outreach business tax results in boards could
pursuant to being Secondary created by planning by efficient audit request for
Fin 48 rules evaluated for adjustments the tax freeing up work and evaluation
thus resulting M&A related department – time involved reduced
in no activity Pre-discussion in litigation reporting
and requirements
significant
evaluation
impact on
with tax
financial
officer
accounts
© 2020 Deloitte Touche Tohmatsu India LLP 17Pros and cons
Pros Cons
• Avoids protracted litigation • Requires rapid decision making and swift
analysis of complex calculations owing to the
• Provides certainty from a tax and financial short time gap between enactment of the Act
disclosure perspective and filing of declaration and payment
• Savings in litigation costs • No option for partially availing the scheme i.e.,
no option to only settle some grounds and
• Waiver of interest and penalty
pursue litigation for others
• Utilization of tax losses
• Results in immediate cash outflow and likely to
• Settlement under scheme will not be viewed as cause diversion of cash resources away from
creating a precedence budgeted expenses
• Trust building measure between taxpayer and • Does not provide relief from double taxation
tax department and specially cases where stakes involved are
high. Taxpayers may opt for APA or MAP in
such cases
© 2020 Deloitte Touche Tohmatsu India LLP 18Panel discussion © 2020 Deloitte Touche Tohmatsu India LLP 19
Polling question #2 Are you planning to opt for the scheme? a. Yes b. Evaluating c. Not sure d. No © 2020 Deloitte Touche Tohmatsu India LLP 20
Way forward © 2020 Deloitte Touche Tohmatsu India LLP 21
Next steps with key timelines
By Mar Mar 19 - March March Mar 27- By March
Apr-Jun
18 23 24-25 26-27 30 31
• Have a first round
of discussion with • Designated • Discussions • Window still
the Assessing authority with open with
officer for cases will evaluate designated 10%
shortlisted for and grant a authority for additional
VSV certificate any payment
for the differences
• Pre-Discussion
amounts • Make payment of
• Detailed rules payable determined
and procedure • Finalise the
amount and
may be computation
withdraw the
prescribed • File the appeal
Declaration
We represented for a few more queries that need clarifications and the
second set of FAQs may also be released soon…
© 2020 Deloitte Touche Tohmatsu India LLP 22Q&A Please type your questions in the chat window © 2020 Deloitte Touche Tohmatsu India LLP 23
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