From 1st June 2016, Direct Tax Dispute Resolution Scheme 2016 came into effect which was incorporated as Chapter X of the Finance Act, 2016. In order to reduce the huge backlog of cases and to enable the Government to realise its dues expeditiously, the Direct Tax Dispute Resolution Scheme 2016 & Equalisation Levy came into effect from 1st June 2016. The declarations under this Scheme may be made on or before the 31 December 2016 in respect of tax arrears & specified tax.The Direct Tax Dispute Resolution Scheme, unveiled in this fiscal’s budget , allows for settlement of cases pending in various courts, tribunals, arbitration or mediation under the Bilateral Investment Protection Agreement (BIPA).
A declarant can file a declaration in relation to tax arrears or specified tax in respect of which appeal is pending before the CIT(A).
Little more about Direct Tax Dispute Resolution Scheme
- Under this scheme a taxpayer, who has an appeal pending as on date before the Commissioner (Appeals) can settle his case by paying the disputed tax and interest up to the date of assessment.
- No penalty for disputed tax up to ₹ 10 lakhs will be levied.
- Cases with disputed tax exceeding ₹ 10 lakh will be subject to 25% of the minimum of the imposable penalty for both direct and indirect taxes.
- Any pending appeal against a penalty order can also be settled by paying 25% of the minimum of the imposable penalty.
Direct Tax Dispute Resolution Scheme will not apply in following cases:-
• Cases where prosecution has been initiated before 29.02.2016.
• Search or survey cases where the declaration is in respect of tax arrears.
• Cases relating to undisclosed foreign income and assets.
• Cases based on information received under DTAA u/s 90 or 90A where the declaration is in respect of tax arrears.
• Person notified under Special Courts Act, 1992.
The scheme can be helpful to companies like Vodafone and Cairn, who are embroiled in retrospective taxation cases. Through this, the companies will have the opportunity of settling the cases by paying only the tax arrears while the interest and penalty will be waived off.