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Direct Tax Vivad Se Vishwas Scheme: Incorporating the changes on account of Covid-19

Direct Tax Vivad Se Vishwas Scheme: Incorporating the changes on account of Covid-19

The Direct Tax Vivad se Vishwas Act, 2020 (hereinafter referred to as ‘VsV’) is a Direct Tax Dispute Settlement Scheme which has received the assent of the Honourable President of India on March 17, 2020. Recently a similar scheme was introduced to settle the pending disputes under the Indirect Taxes, post successful results of which, the subject scheme has been launched for settling the disputed cases in the Direct Tax regime. The main objectives of the scheme are-

  • Reducing the Income Tax pending litigation; and
  • Generating timely revenues for the Government. 

COVERAGE  The assessees having the following category of disputes shall be eligible to opt for the scheme-

  • Appeals, writs, Special Leave Petitions (SLPs), arbitration (filed either by the Income Tax Department or the taxpayer) filed on or before 31 Jan 2020. The pending appeal, writ, SLP, arbitration could be against-

  ? Disputed tax (including interest or penalty on such disputed tax) in relation to an assessment or reassessment order; and ? Disputed interest, disputed penalty or disputed fees where there is no disputed tax.

  • Orders for which time for filing appeal has not been expired on 31 Jan 2020;
  • Cases pending before the Dispute Resolution Panel (DRP);
  • Cases where DRP issued direction on or before 31 Jan 2020 but order has not yet been passed;
  • Cases where assessee filed revision application under section 264 on or before 31 Jan 2020; and
  • Dispute where payment has already been made.

Note ? Disputed tax can also include the tax determined on default in respect of tax deducted at source (TDS) or tax collected at source (TCS). ? Disputed tax shall include tax on enhancement notice. EXCLUSIONS

  • Search cases if disputed tax in a year is more than INR 5 crore;
  • Cases where prosecution has been initiated by the department under Income-tax Act or under Indian Penal Code;
  • Cases involving undisclosed foreign income and assets;
  • Cases completed on the basis of information received from foreign jurisdiction;
  • Cases where person is notified under Special Courts (Trial of Offences Relating to Transactions in Securities) Act, 1992 or detained under Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974; and
  • Cases covered under Narcotic Drugs and Psychotropic Substances Act, Unlawful Activities (Prevention) Act, Prevention of Corruption Act, Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, Prevention of Money Laundering Act, Prohibition of Benami Property Transactions Act.

CALCULATION OF AMOUNT PAYABLE

Sn Nature of Tax Arrear Amount Payable under VsV on or before 31 March 2020 30 June 2020 Amount Payable under VsV on or after 1 April 2020 1 July 2020 but on or before the last date
1 Disputed Tax, Interest Charged / Chargeable and Penalty Levied / Leviable thereon. 100% of amount of Disputed Tax (No interest and no penalty). Lowest of- ?      110% of amount of Disputed Tax OR ?      100% Disputed Tax along with interest and penalty thereon.  
2 Disputed Tax, Interest or Penalty assessed on the basis of Search U/s 132 or 132A of Income Tax Act Lowest of- ?      125% of amount of Disputed Tax OR ?      100% Disputed Tax along with interest charged / chargeable and penalty levied / leviable thereon.   Lowest of- ?      135% of amount of Disputed Tax OR ?      100% Disputed Tax along with interest charged / chargeable and penalty levied / leviable thereon.
3 Disputed Interest, penalty or fee but does not include Disputed Tax. 25% of the Disputed Interest, penalty or fee. 30% of the Disputed Interest, penalty or fee.

COURSE OF ACTION Eligible assessees while deciding to opt for VsV scheme shall consider points such as the cost involved in litigation vs the tax disputed, probability of a favourable outcome otherwise, availability of instant funds to pay the liability as the same will have to be paid within 30 days from the date of opting the scheme. However once the assessee is ready to exercise the option, the following course of action shall have to be adopted-

  • Identification of the matters where the scheme is to be opted for.
  • Withdrawal of the appeal pending before the authorities.
  • Online filing the declaration in Form – 1 for opting the VsV scheme with the Designated Authority (as notified) along with an undertaking in Form - 2 for not seeking any further remedy related to the tax arrears in subject.
  • The Designated Authority shall grant a certificate electronically in Form - 3 within 15 days from the receipt of the application which shall also specify the tax payable.
  • The assessee shall have to make the payment within 15 days from the date of receipt of such certificate from Designated Authority.
  • The detail of payment so made along with the proof of withdrawal of appeal, objection, application, writ petition, SPL, arbitration, conciliation, mediation or claim is to be furnished to the Designated Authority in Form – 4.
  • Designated Authority shall pass an order in Form – 5 stating the particulars of payment made by the assessee.
  • This order passed by Designated Authority shall be final and binding and pursuant to this, the matter shall not be opened under any law.

As a special measure the timeline to opt for VsV scheme without incurring any 10% additional tax or interest and penalty has been extended to 30 June 2020. The government notified the forms on 18 March 2020 and therefore this is the appropriate time to file these applications. We, at ASC, shall be pleased to assist the assessees interested to opt for the scheme and can also assist in evaluating whether the scheme shall be useful or otherwise.

 

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