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One-Time Amnesty Scheme in Making for Old Income Tax Cases Worth at Least Rs 8 Lakh Crore

Such a waiver would enable taxpayers to focus time and energies on their businesses by trimming down the volume of tax litigation significantly, also making it easier for companies to do business in India.


Updated:July 16, 2019, 11:21 AM IST
One-Time Amnesty Scheme in Making for Old Income Tax Cases Worth at Least Rs 8 Lakh Crore
Representative image.

A one-time amnesty grant for legacy income-tax disputes worth at least Rs 8 lakh crore may be in the works, according to sources. They speculate that a government task force is likely to make the recommendation.

Such a waiver would enable taxpayers to focus time and energies on their businesses by trimming down the volume of tax litigation significantly, also making it easier for companies to do business in India. However, experts warn that the effectiveness of such amnesty would be clear only once the actual details are revealed.

"Litigation of this nature, especially in case of cross-border tax issues and transfer pricing, makes it difficult for companies to do business in India. Bringing about a scheme to resolve such long pending litigation would be very welcome. Taxpayers would unlock so much of their time, energy and resources to focus on their businesses and the intricacies of solving them rather than resolving repeated tax issues,” said Daksha Baxi, head – international taxation, Cyril Amarchand Mangaldas.

"Till the scheme is out, it is difficult to say how effective it would be in resolving long-drawn litigation which have been stuck for many years, some for more than 12 years,” she added.

The scheme, under the Direct Tax Code which will be drafted by the task force, is said to grant a one-time amnesty window but only for three or four months.

In the Union Budget announced on July 5, the "Sabka Vishwas" scheme was announced, which aims to resolve legacy disputes for excise and service tax litigation. However, it did not mention anything on direct tax disputes, as the matter was being examined by the said task force.

According to a government official, only last moth the government included objectives like reduction in the number of tax cases and called for their speedy resolution.

The draft is to be submitted by July 31.

“A litigation resolution scheme [for direct taxes] that was introduced three years back could not be successful because it demanded full payment of disputed tax, with full interest, and it only reduced penalty amount. It was something like I win and you lose,” said Nikhil Rohera, partner-corporate and international tax, PwC. He added that the amnesty scheme reduces the amount of disputed tax significantly by waiving interest and penalty amounts.

Experts hope that the scheme is liberal and similar to the "Sanka Vishwas" scheme, since data shows that 70% of such litigation are in favour of taxpayers.

As per a research paper titled 'Tax Dispute Resolution in India: Trends and Insights', 465,349 such cases are pending at various tribunals and courts. At the Income Tax Commissioner (Appeals) [ICT-A] level, the amount involved is Rs 6,38,000 crore as on March 31, 2018.

Cases involving Rs 4,96,000 crore are pending at the Income Tax Appellate Tribunal, High Courts and the Supreme Court.

The then minister of state for finance, Santosh Kumar Gangwar had said in 2016 that the total amount stuck in direct tax litigation was Rs 8,20,741 crore.

In a directive issued by the government last July, it asked tax authorities to only pursue appeals for cases up to Rs 20 lakh at the ITAT level. At high court level, the threshold was increased to Rs 50 lakh, and at the Supreme Court, to Rs 1 crore. This will lead to a drop in the number of litigation.

The task force is headed by Akhilesh Ranjan, a member of the Central Board of Direct Taxes (CBDT).

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