03 March 2020
Vivad Se Vishwas Scheme – Amendment Proposals
 
Direct Tax, 'Vivad se Vishwas' Bill, 2020 (scheme), which was introduced in Lok Sabha on 5 February 2020 faced various concerns from stakeholders on the limitations of the scheme.
 
As per recent reports, the government has notified the Lok Sabha for moving amendments to the bill. Such amendments are expected to be tabled in the Parliament soon.

Key highlights of the amendments are as follows:
 
Scope Expansion
 
It is proposed to expand the scope of the scheme to make it applicable to the following scenarios:
  • Cases pending before Dispute Resolution Panel (DRP) as on 31 January 2020;
  • Directions issued by DRP, but tax officer is yet to pass the final assessment order;
  • Pending revision applications filed by taxpayers under section 264;
  • Orders passed by tax officer/lower appellate authorities on or before the above date and time limit to file the appeal is yet to expire;
  • Assessments made pursuant to search/seizure (including the year of search), if amount of disputed tax is upto INR 5 crores;
  • Appeals where enhancement of income has been proposed by CIT(A)
Amount payable under the scheme
 
Earlier 100% of the tax was to be paid in all cases, where such payment of tax is made on or before 31 March 2020. Any payment after this date would require 110% of the tax amount to be paid. Now, varying amounts would be payable depending upon the scenarios involved, to accommodate the above expanded scope. The amount payable would be:

 
Nature of tax arrears Amount payable on or before 31 March 2020 Amount payable thereafter up to the last date as may be specified
Where tax arrears include disputed tax, disputed interest and disputed penalty, in any assessment based on search under section 132 or 132A of the Act  Amount of disputed tax plus 25% thereof. The additional 25% will be restricted to the amount of interest and penalty Amount of disputed tax plus 35% thereof. The additional 35% will be restricted to the amount of interest and penalty
Where tax arrears include disputed tax, disputed interest and disputed penalty, in any other case Amount of the disputed tax Amount of disputed tax plus 10% thereof. The additional 10% will be restricted to the amount of interest and penalty 
Where tax arrear relates to disputed interest or disputed penalty or disputed fee 25% of disputed interest or disputed penalty or disputed fee 30% of disputed interest or disputed penalty or disputed fee

 
Above amounts shall be paid in half where:
  • Appeal or writ petition or SLP have been filed by revenue; or
  • Appeal or objections have been filed by taxpayer before CIT(A)/ ITAT or DRP and issue is covered in its favor in its own case, without any reversal by any higher appellate authority.
Disputed Tax

Definition of ‘Disputed Tax’ has also been realigned pursuant to the expansion of the scheme in its coverage. It has been proposed that the amount of disputed tax will now be computed in the following manner:-

Scenario Disputed Tax
Pending Appeal/ Writ/ SLP Tax payable assuming the matter is decided against the taxpayer
Appeal/ Writ Disposed, timeline for filing appeal yet to expire Tax payable pursuant to giving effect to the Appellate/writ order
Assessment order passed, timeline for filing appeal yet to expire Tax payable as per assessment order
Pending DRP directions Tax payable as per draft assessment order as if the DRP will confirm the variations
Directions issued by DRP, final assessment order yet to be passed Tax payable after considering DRP directions
Pending 264 revision application Tax payable considering that such application would not be accepted
Enhancement proposed by CIT(A)   Tax payable to be increased by the amount of tax pertaining to be issued for which enhancement notice is received

Above definition is relevant while determining the amount payable under the scheme.

Reduced Loss/Mat Credit/Depreciation

Cases where the disputed tax pertains to reduction of losses or MAT credit or depreciation, taxpayers have an option to either:

  • Pay tax as per the scheme, in relation to such reduced MAT credit or loss or depreciation; or
  • Carry forward reduced MAT credit, loss, or depreciation
Detailed rules on how such option needs to be exercised, are to be notified by CBDT.

Other Key Amendments

The scheme now also provides for the following relaxations-

  • Appeals/writ petitions/special leave petitions or arbitration or mediation proceedings, etc. can now be withdrawn upon issuance of the certificate by the tax officer, determining the amount payable under the scheme;
  • Proof of withdrawal of appeals/other requisitions as per amended scheme can now be filed along with initiation for payment of the amount paid under the scheme;
  • Filing a declaration under the scheme cannot be construed as conceding to the tax positions, either by the taxpayers or by the revenue authorities;
  • Excess tax paid before filing a declaration under the scheme is refundable.
Our Comments
The amendments to the scheme are commendable as substantial amendments brought in by the scheme are unprecedented. It seems that the government intends to make this a ‘People’s Scheme.

However, the following concerns of the taxpayers still need to be addressed:
  • Credit of tax already paid while determining the amount payable, so that only the balance amount is payable by the taxpayer under the scheme;
  • Entitlement of MAT Credit in subsequent years, in case tax is paid under scheme under MAT provisions;
  • Eligibility of tax credit to the deductee in case the dispute relates to withholding tax;
  • Eligibility to claim ‘foreign tax credit’ under respective bilateral tax treaties, against the tax paid under the scheme;
  • Clarity on secondary adjustment pursuant to TP adjustment settled under scheme.

One may expect CBDT to bring detailed FAQs to allay different concerns of the taxpayers.

Lastly, had the scheme offered an option to close the appeals issue-wise and/or for an amount lower than the tax under dispute, it would have proved to be a major revenue collection measure for the government, apart from bringing down the litigations to a more significant extent. 

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+91 22 6730 9000 | skp.tax@skpgroup.com | www.nexdigm.comwww.skpgroup.com
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