Clarifications on provisions of the direct tax vivad se vishwas act 2020
Circular No. 9/2020 was issued by the Central Board of Direct Taxes on 22 April 2020. Its subject is Clarifications on provisions of the direct tax vivad se vishwas act 2020.
This is a clarification. The Board is stating how it reads a provision. That reading binds the department; it does not bind a court, and where the section says otherwise the section wins.
Reissues, now that the Direct Tax Vivad se Vishwas Act, 2020 has been passed and assented to, the 55 answers earlier given on the Bill by Circular No. 7/2020 dated 4 March 2020, with four changes: the Scheme is now the Act and not the Bill, references to a clause become references to a section, references to the declaration form are replaced by the relevant notified form since the rules and forms have been notified, and the answer to question 22 is modified to reflect the correct intent of the law. On that modified answer, a mere notice for initiation of prosecution, with no prosecution actually instituted, does not disqualify the assessee, but where prosecution has been instituted for an assessment year he cannot file a declaration for that year unless the prosecution is compounded before the declaration is filed. The circular is issued under sections 10 and 11, which let the Board and the Central Government give directions in public interest or to remove difficulties, and the Board records that some of the answers extend the application of the Scheme on that basis. On scope, appeals pending before the Commissioner (Appeals), the Tribunal, the High Court or the Supreme Court, writ petitions and special leave petitions pending on the specified date of 31 January 2020, orders where the time to appeal had not expired by then, matters pending before the Dispute Resolution Panel or awaiting the final order after its directions, pending revision applications under section 264, and cases where arbitration, conciliation or mediation had been begun or noticed, are all covered.
The earlier answers had been given while the Bill was before Parliament and were expressly subject to its passing; once it was enacted they had to be restated against the Act as it stands.
F. No. JT(A)/1/2020-TPL
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
****
Circular /2 020
Dated: pril, 2020
Sub.: Clarifications on provisions of the Direct Tax Vivad se Vishwas Act, 2020 - reg.
During the Union Budget, 2020 presentation, the 'Vivad se Vishwas' Scheme was announced to provide for dispute resolution in respect of pending income tax litigation. Pursuant to Budget announcement, the Direct Tax Vivad se Vishwas Bill, 2020 (the Bill) was introduced in the Lok Sabha on 5th Feb, 2020. Subsequently, based on the representations received from the stakeholders regarding its various provisions, official amendments to the Bill were proposed. These amendments sought to widen the scope of the bill and reduce the compliance burden on taxpayers.
2. After introduction of the bill in Lok Sabha, several queries were received from the stakeholders seeking clarifications in respect of various provisions contained therein. Government had considered these queries and had dccided to clarify the same in fonn of answcrs to frequently asked questions (FAQs) vide circular no 7 of 2020 dated 41h March 2020. These clarifications were, however, subject to approval and passing of the bill by the Parliament and receiving assent of the Hon 'ble President of India.
3. The Bill has since been passed by the Parliament and has also received the assent of the Hon 'ble President of India and has now been enacted as The Direct Tax Vi vad Se Vishwas Act, 2020 ( Viva(/ se Vishwas). The objcctive of Vivad se Vis/lWas is to inler alia reduce pending income tax litigation, generate timely revenue for the Government and benefit taxpayers by providing them peace of mind, cel1ainty and savings on account of time and resources that would otherwise be spent on the long-drawn and vexatious litigation process.
4. 55 questions containcd in circular no 7 of 2020 arc reissued under this circular with following modi Rcations
(i) Vivad se Vis/lWas refelTed to Direct Tax Vivad se Vishwas Bill, 2020 in circular no 7. Howcver, in this circular it refers to The Direct Tax Vivad Se Vishwas Act, 2020;
(ii) Since clauses of the Bill have now become sections in the Vivad Se Vis/lWas, the reference to "clause" in circular no 7 has been replaced with "section";
(iii) Reference to declaration form in circular no 7 has been replaced with referencing of relevant fonn, since rules and forms have now been notified; and
(i v) Answer to question no 22 has been modified to renect the COlTCCt intent of the law. It has now been clarified that where only notice for initiation of prosecution has been issued without prosecution bcing instituted, the assessee is eligiblc to file declaration under Viva(/ se Vi.\·hwas. However, where the prosecution has been instituted with respect to an assessment year, the assessec is not eligible to file declaration for that assessment year under Vivad se Vis/nvas, unlcss the prosecution is compounded before filing the declaration.
5. Section 10 and II of the Vivad se VislHvas empowers the Board or the Central Government to issue directions or orders in public interest or to remove difficulties. This circular is such direction/order issued under section 10 and section II of the Vivad se VislHvas. Thus answers to some of the questions in this circular extend the application of Vivad se Vishwas in public interest or to remove difficulties, under section 10 and section II of Vivad se Vishwas.
"QUESTIONS ON SCOPE/ ELIGIBILITY (Q. No. 1- 24)"
Question No.
Answer:
Question No.
Answer:
Question No.
Answer:
1.
2.
3.
Which appeals are covered ullder th e Vivad se Visllwas?
Appeals pending before the appellate forum [Commissioner (Appeals), Income Tax Appellate Tribunal (ITAT), High Court or Supreme Court), and writ petitions pending before High Court (HC) or Supreme Court (SC) or special leave petitions (SLPs) pending before SC as on the 31 st day of January, 2020 (specified date) are covered. Cases where the order has been passed but the time limit for filing appeal under the Income-tax Act, 1961 (the Act) against the order has not expired as on the specified date arc also covered. Similarly, cases where objections filed by the assessee against draft order arc pending with Dispute Resolution Panel (DRP) or where DRP has given the directions but the Assessing Officer (AO) has not yet passed the final order on or before the specified date are also covered. Cases where revision application under section 264 of the Act is pending before the Principal Commissioner or Commissioner are covered as well. Fruther, where a declarant has initiated any proceeding or glven any notice for arbitration, conciliation or mediation as rcfelTed to in section 4 of the Bill is also covered.
If th ere is 110 appeal pellding but the Cflse is pendillg in arbitratioll, will the taxpayer he eligihle to apply under Vivad se Vishwas? If yes what will be the disputed tax?
An assessee whose case is pending in arbitration is eligible to apply for settlement under Vivad se VislHvas even if no appeal is pending. In such case assessee should fill the relevant details applicable in his case in the declaration foml . The disputed tax III this case would be the tax (including surcharge and cess) on the disputed income with reference to which the arbitration has been filed.
Whether Vivad se Vishwas can be availed for proceeding.'· pellding before Authority of Adv(lIIce Rulillg (AA R)? If a writ is pellding against order passed by AAR ill a lie will that case he covered aud how disputed tax to he calculated?
Vivad se Visillva.'· is not available ror disputes pending before AAR. However, ir the order passed by AAR has detennined the total income of an assessment year and writ against such order is pending in HC, the appellant would be eligible to apply for the Vivad .,e Vis/Hva.\'. The disputed tax in that case shall be calculated as per the order of the AAR and accordingly, wherever required, consequential order shall be passed by the 1\0. However, if the order of AAR has not determined the total income, it would not be possible to calculate disputed tax and hence such cases would not be covered.Question No. 28. What amount of tax is required to be paid, if an assessee wants to avail the benefit of the Vivad se Vishwas?
Answer: Under the Vivad se Vishwas, declarant is required to make following payment for settling disputes:
A. In appeals/writ/SLP/DRP objections/revision application under section 264/arbitration filed by the assessee -
(a) In case payment is made till 31st March, 2020:
(i) 100% of the disputed tax (125% in search cases) where dispute relates to disputed tax (excess amount over 100% limited to the amount of interest and penalty levied or leviable), or
(ii) 25% of the disputed penalty, interest or fee where dispute relates to disputed penalty, interest or fee only.(b) In case payment is made after 31st March, 2020:
(i) 110% of the disputed tax (135% in search cases) where dispute relates to disputed tax (excess amount over 100% limited to the amount of interest and penalty), or
(ii) 30% of the disputed penalty, interest or fee in case of dispute related to disputed penalty, interest or fee only.However, if in an appeal before Commissioner (Appeals) or in objections pending before DRP, there is an issue on which the appellant has got favourable decision from ITAT (not reversed by HC or SC) or from the High Court (not reversed by SC) in earlier years then the amount payable shall be half or 50% of above amount.
Similarly, if in an appeal before ITAT, there is an issue on which the appellant has got favourable decision from the High Court (not reversed by SC) in earlier years then the amount payable shall be half or 50% of above amount.
B. In appeals/writ/SLP filed by the Department -
(a) In case payment is made till 31st March, 2020:
(i) 50% of the disputed tax (62.5% in search cases) in case of dispute related to disputed tax or
(ii) 12.5% of the disputed penalty, interest or fee in case of dispute related to disputed penalty, interest or fee only.(b) In case payment is made after 31st March, 2020:
(i) 55% of the disputed tax (67.5% in search cases) in cases of dispute related to disputed tax, or
(ii) 15% of the disputed penalty, interest or fee in case of dispute related to disputed penalty, interest or fee only.Question No. 29. Whether credit for earlier taxes paid against disputed tax will be available against the payment to be made under Vivad se Vishwas?
Answer: The amount payable by the declarant under Vivad se Vishwas shall be determined by the DA under section 5. Credit for taxes paid against the disputed tax before filing declaration shall be available to the declarant. Please refer to example at question no. 26 above. If in that example against disputed tax of Rs. 10,000 an amount of Rs. 8,000/- has already been paid, the appellant would be required to pay only the remaining Rs. 2,000/- by 31st March 2020.
Question No. 30. Where assessee settles TDS appeal or withdraws arbitration (against order u/s 2(11) as deductor of TDS, will credit of such tax be allowed to deductee?
Answer: In such cases, the deductee shall be allowed to claim credit of taxes in respect of which the deductor has availed of dispute resolution under Vivad se Vishwas. However, the credit will be allowed as on the date of settlement of dispute by the deductor and hence the interest as applicable to deductee shall apply.
Question No. 31. Where assessee settles TDS liability as deductor of TDS under Vivad se Vishwas (i.e against order u/s 2(11), when will he get consequential relief of expenditure allowance under proviso to section 40(a)(i)/(ia)?
Answer: In such cases, the deductor shall be entitled to get consequential relief of allowable expenditure under proviso to section 40(a)(i)/(ia) in the year in which the tax was required to be deducted.
To illustrate, let us assume that there are two appeals pending; one against the order under section 201 of the Act for non-deduction of TDS and another one against the order under section 143(3) of the Act for disallowance under section 40(a)(i)/(ia) of the Act. The disallowance under section 40 is with respect to same issue on which order under section 201 has been issued. If the dispute is settled with respect to order under section 201, assessee will not be required to pay any tax on the issue relating to disallowance under section 40(a)(i)/(ia) of the Act, in accordance with the provision of section 40(a)(i)/(ia) of the Act.
In case, in the order under section 143(3) there are other issues as well, and the appellant wants to settle the dispute with respect to order under section 143(3) as well, then the disallowance under section 40(a)(i)/(ia) of the Act relating to the issue on which he has already settled liability under section 201 would be ignored for calculating disputed tax.
If the assessee has challenged the order under section 201 on merits and has won in the Supreme Court or the order of any appellate authority below Supreme Court on this issue in favour of the assessee has not been challenged by the Department on merit (not because appeal was not filed on account of monetary limit for filing of appeal as per applicable CBDT circular), then in a case where disallowance under section 40(a)(i)/(ia) of the Act is in consequence of such order under section 201 and is part of disputed income as per order under section 143(3) in his case, such disallowance would be ignored for calculating disputed tax, in accordance with the proviso to section 40(a)(i)/(ia) of the Act.
It is clarified that if the assessee has made payment against the addition representing section 40(a)(i)/(ia) disallowance, the assessee shall not be entitled to interest under section 244A of the Act on amount refundable, if any, under Vivad se Vishwas.
Question No. 32. When assessee settles his own appeal or arbitration under Vivad se Vishwas, will consequential relief be available to the deductor in fault from liability determined under TDS order u/s 201?
Answer: When an assessee (being a person receiving an income) settles his own appeal or arbitration under Vivad se Vishwas and such appeal or arbitration is with reference to assessment of an income which was not subjected to TDS by the payer of such income (deductor in default) and an order under section 201 of the Act has been passed against such deductor in default, then such deductor in default would not be required to pay the corresponding TDS amount. However, he would be required to pay the interest under sub-section (1A) of section 201 of the Act. If such levy of interest under sub-section (1A) of section 201 qualifies for Vivad se Vishwas, the deductor in default can settle this dispute at 25% or 30% of the disputed interest, as the case may be.
Question No. 33. Where DRP order passed on or after 1st July, 2012 and before 1st June, 2016 have given relief to assessee and Department has filed appeal, how assessed tax to be calculated?
Answer: If department appeal is required to be settled, then against that appeal, the appellant is required to pay only 50% of the amount that is otherwise payable if it was his appeal.
Question No. 34. Appeals against assessment order and against penalty order are filed separately on same issue. Hence there are separate appeals for both. In such a case how disputed tax to be calculated?
Answer: Please see question no. 8. Further, it is clarified that if the appellant has both appeal against assessment order and appeal against penalty relating to same assessment pending for the same assessment year, and he wishes to settle the appeal against assessment order (with penalty appeal automatically covered), he is required to indicate both appeals in one declaration form (Form No 1) for that year.
Question No. 35. If there is substantive addition as well as protective addition in the case of same assessee for different assessment year, how will that be covered? Similarly if there is substantive addition in case of one assessee and protective addition on same issue in the case of another assessee, how will that be covered under Vivad se Vishwas?
Answer: If the substantive addition is eligible to be covered under Vivad se Vishwas, then on settlement of dispute related to substantive addition AO shall pass rectification order deleting the protective addition relating to the same issue in the case of the assessee or in the case of another assessee.
Question No. 36. In a case ITAT has passed order giving relief on two issues and confirming three issues. Time to file appeal has not expired as on specified date. The taxpayer wishes to file declaration for the three issues which have gone against him. What about the other two issues as the taxpayer is not sure if the department will file appeal or not?
Answer: The Vivad se Vishwas allow declaration to be filed even when time to file appeal has not expired considering them to be a deemed appeal. Vivad se Vishwas also envisages option to assessee to file declaration for only his appeal or declaration for department appeal or declaration for both. Thus, in a given situation the appellant has a choice, he can only settle his deemed appeal on three issues, or he can settle department's deemed appeal on two issues or he can settle both. If he decides to only settle his deemed appeal, then department would be free to file appeal on the two issues (where the assessee has got relief) as per the extant procedure laid down and directions issued by the CBDT.
Question No. 37. There is no provision for 50% concession in appeal pending in HC on an issue where the assessee has got relief on that issue from the SC?
Answer: If the appellant has got decision in his favour from SC on an issue, there is no dispute now with regard to that issue and he need not settle that issue. If that issue is part of the multiple issues, the disputed tax may be calculated on other issues considering nil tax on this issue.
Question No. 38. Addition was made u/s 143(3) on two issues whereas appeal filed only for one addition. Whether interest and penalty be waived for both additions.
Answer: Under Vivad se Vishwas, interest and penalty will be waived only in respect of the issue which is disputed in appeal and for which declaration is filed. Hence, for the undisputed issue, the tax, interest and penalty shall be payable.
Question No. 39. DRP has issued directions confirming all the proposed additions in the draft order and the AO has passed the order accordingly. The issues confirmed by DRP include all issue on which the taxpayer has got favourable order from ITAT (not reversed by HC or SC) in all earlier years. The time limit to file appeal in ITAT is still available. The taxpayer is eligible for Vivad se Vishwas treating the situation as taxpayer's deemed appeal in ITAT. In this case how will disputed tax be calculated? Will it be 100% on the issue allowed by ITAT in earlier years or 50%?
Answer: In this case, on the issue where the taxpayer has got relief from ITAT in an earlier year (not reversed by HC or SC) the disputed tax shall be computed at half of normal rate of 100%, 110%, 125% or 135%, as the case may be.
Question No. 40. Where there are two appeals filed for an assessment year- one by the appellant and one by the tax department, whether the appellant can opt for only one appeal? If yes, how would the disputed tax be computed?
Answer: The appellant has an option to opt to settle appeal filed by it or appeal filed by the department or both. Declaration form is to be filed assessment year wise i.e. only one declaration for one assessment year. For different assessment years separate declarations have to be filed. So the declarant needs to specify in the declaration Form No 1, whether he wants to settle his appeal, or department's appeal in his case or both for a particular assessment year. The computation of tax payable would be carried out accordingly.
QUESTIONS RELATED TO PROCEDURE (Q. No. 41-50)
Question No. 41. How much time shall be available for paying the taxes after filing a declaration under the Vivad se Vishwas?
Answer: As per section 5 of Vivad se Vishwas, the DA shall determine the amount payable by the declarant within fifteen days from the date of receipt of the declaration and grant a certificate to the declarant containing particulars of the tax-arrear and the amount payable after such determination. The declarant shall pay the amount so determined within fifteen days of the date of receipt of the certificate and intimate the details of such payment to the DA in the prescribed form. Thereafter, the DA shall pass an order stating that the declarant has paid the amount. It may be clarified that 15 days is outer limit. The DAs shall be instructed to grant a certificate at an early date enabling the appellant to pay the amount on or before 31st March, 2020 so that he can take benefit of reduced payment to settle the dispute.
Question No. 42. If taxes are paid after availing the benefits of the Vivad se Vishwas and later the taxpayer decides to take refund of these taxes paid, would it be possible?
Answer: No. Any amount paid in pursuance of a declaration made under the Vivad se Vishwas shall not be refundable under any circumstances.
Question No. 43. Where appeals are withdrawn from the appellate forum, and the declarant is declared to be ineligible under the Vivad se Vishwas by the DA at the stage of determination of amount payable under section 5(1), amount determined by DA is at variance of amount declared by declarant and declarant is not agreeable to DA's determination of amount payable, then whether the appeals are automatically reinstated or a separate application needs to be filed for reinstating the appeal before the appellate authorities?
Answer: Under the amended procedure no appeal is required to be withdrawn before the grant of certificate by DA. After the grant of certificate by DA under section 5, the appellant is required to withdraw appeal or writ or special leave petition pending before the appellant forum and submit proof of withdrawal with intimation of payment to the DA as per the same section. Where assessee has made request for withdrawal and such request is under process, proof of request made shall be enclosed.
Similarly in case of arbitration, conciliation or mediation, proof of withdrawal of arbitration/conciliation/mediation is to be enclosed along with intimation of payment to the DA.
Question No. 44. Section 5(2) requires declarant to pay amount determined by DA within 15 days of receipt of certificate from DA. Clarification is required on whether declarant is to also intimate DA about fact of having made payment pursuant to declaration within the period of 15 days?
Answer: As per section 5(2), the declarant shall pay the amount determined under section 5(1) within fifteen days of the date of receipt of the certificate and intimate the details of such payment to the DA in the prescribed form and thereupon the DA shall pass an order stating that the declarant has paid the amount.
Question No. 45. Will DA also pass order granting expressly, immunity from levy of interest and penalty by the AO as well as immunity from prosecution?
Answer: As per section 6, subject to the provisions of section 5, the DA shall not institute any proceeding in respect of an offence; or impose or levy any penalty; or charge any interest under the Income-tax Act in respect of tax arrears. This shall be reiterated in the order under section 5(2) passed by DA.
Question No. 46. Whether DA can amend his order to rectify any patent errors?
Answer: Yes, the DA shall be able to amend his order under section 5 to rectify any apparent errors.
Question No. 47. Where tax determined by DA is not acceptable can appeal be filed against the order of designated authority before ITAT, High Court or Supreme Court?
Answer: No. As per section 4(7), no appellate forum or arbitrator, conciliator or mediator shall proceed to decide any issue relating to the tax arrears mentioned in the declaration in respect of which order is passed by the DA or the payment of sum determined by the DA.
Question No. 48. There is no provision for withdrawal of appeal/writ/SLP by the department on settlement of dispute?
Answer: On intimation of payment to the DA by the appellant pertaining to department appeal/writ/SLP, the department shall withdraw such appeal/writ/SLP.
Question No. 49. Once declaration is filed under Vivad se Vishwas, and for financial difficulties, payment is not made accordingly, will the declaration be null and void?
Answer: Yes it would be void.
Question No. 50. Where the demand in case of an assessee has been reduced partly or fully giving appeal effect to the order of appellate forum, how would the amount payable under Vivad se Vishwas be adjusted?
Answer: In such cases, after getting the proof of payment of the amount payable under Vivad se Vishwas, the AO shall pass order under section 154 of the Act read with the relevant provisions of Vivad se Vishwas as to create demand in case of assessee against which the amount payable shall be adjusted.
QUESTIONS RELATED TO CONSEQUENCES (Q. No. 51-55)
Question No. 51. Will there be immunity from prosecution?
Answer: Yes, section 6 provides for immunity from prosecution to a declarant in relation to a tax arrears for which declaration is filed under Vivad se Vishwas and in whose case an order is passed by the DA that the amount payable under Vivad se Vishwas has been paid by the declarant.
Question No. 52. Will the result of this Vivad se Vishwas be applied to same issues pending before AO?
Answer: No, only the issues covered in the declaration are settled in the dispute without any prejudice to same issues pending in other cases. It has been clarified that making a declaration under this Act shall not amount to conceding the tax position and it shall not be lawful for the income-tax authority or the declarant being a part in appeal or writ or in SLP to contend that the declarant or the income-tax authority, as the case may be, has acquiesced in the decision on the disputed issue by settling the dispute.
Question No. 53. If loss is not allowed to be adjusted while calculating disputed tax, will it be allowed to be carried forward?
Answer: As per the amendment proposed in Vivad se Vishwas, in a case where the dispute in relation to an assessment year relates to reduction of Minimum Alternate Tax (MAT) credit or reduction of loss or depreciation, the appellant shall have an option either to (i) include the amount of tax related to such MAT credit or loss or depreciation in the amount of disputed tax and carry forward the MAT credit or loss or depreciation or (ii) to carry forward the reduced tax credit or loss or depreciation. CBDT will prescribe the manner of calculation in such cases.
Question No. 54. If the taxpayer avails Vivad se Vishwas for Transfer Pricing adjustment, will provisions of section 92CE of the Act apply separately?
Answer: Yes, secondary adjustment under section 92CE will be applicable. However, it may be noted that the provision of secondary adjustment as contained in section 92CE of the Act is not applicable for primary adjustment made in respect of an assessment year commencing on or before the 1st day of April 2016. That means, if there is any primary adjustment for assessment year 2016-17 or earlier assessment year, it is not subjected to secondary adjustment under section 92CE of the Act.
Question No. 55. The appellant has settled the dispute under Vivad se Vishwas in an assessment year. Whether it is open for Revenue to take a stand that the additions have been accepted by the appellant and hence he cannot dispute it in future assessment years?
Answer: Please refer answer to question no. 52. It has been clarified in Explanation to section 5 that making a declaration under Vivad se Vishwas shall not amount to conceding the tax position and it shall not be lawful for the income-tax authority or the declarant being a part in appeal or writ or in SLP to contend that the declarant or the income-tax authority, as the case may be, has acquiesced in the decision on the disputed issue by settling the dispute.
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When testing eligibility to settle a year under the Scheme against a pending appeal or a prosecution, and in any later dispute over a declaration filed for that period.
Source: the Income Tax Department’s own published text — its page for this instrument.