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Clarifications issued by CBDT in the form of FAQs on Vivad se Vishwas Scheme, 2020

FAQs on Vivad se Vishwas Scheme

The Finance Minister, Nirmala Sitharaman, had propounded a bill in Lok Sabha on February 5, 2020 to resolve direct tax disputes and the same has been passed on March 4. It is known as the Direct Tax Vivad se Vishwas Bill, 2020. The rationale behind the Bill is to reduce pending income tax litigation, benefit taxpayers by giving them peace of mind, and save their time and resources which they would be otherwise spending on prolonged and worrisome litigation procedures. This article strives to put forward a gist of FAQs on Vivad se Vishwas Scheme.

Based upon the representations received from the stakeholders concerning the various provisions of Vivad se Vishwas scheme, official amendments have been proposed in the scheme vide Circular No.7/2020 dated 04.03.2020. Such amendments seek to widen the scope of the scheme and minimize the compliance burden on taxpayers.

After being considerate to several queries raised by stakeholders and taxpayers, the CBDT has issued clarifications to the same in the form of answers to frequently asked questions (FAQs). These FAQs on Vivad Se Vishwas scheme are announced so as to render clarity with regard to the various matters contained in the scheme. The clarifications entailed therein comprise matters with respect to scope and eligibility of the scheme, calculation of disputed tax, process related to payment of disputed tax, and the consequential benefits available to the declarant. In total, the CBDT has brought forward 55 FAQs on Vivad Se Vishwas Bill to answer the queries of the stakeholders.

Overview of Vivad se Vishwas Scheme

As on November 30, 2019, the aggregate of taxes standing under dispute amounted to Rs. 9.32 lakh crore. The Vivad se Vishwas Bill gives a complete waiver of interest, penalty and prosecution for the settlement of these disputes. It offers a waiver of interest and penalty for all payments made by March 31. For payments made from April 1, an additional 10% of the disputed amount will need to be paid. The Bill proposes to settle 4.83 lakh direct tax cases pending at various appellate forums. The government expects to resolve 90% of the income tax disputes through this scheme. It is expected to reduce the litigation expenditure for the government and generate revenue. Income tax cases being arbitrated abroad can also be settled under this scheme.

It is worth mentioning here that the scheme is applicable for the appeals lying pending before various appellate tribunals on or before 31^st January 2020. The aim of the Bill is to resolve direct tax-related disputes in a speedy manner. It includes disputes pending in all appellate forums such as Supreme Court, the High Courts, the Income Tax Appellate Tribunals, etc.

Filing of Declarations under “Vivad se Vishwas” Scheme

Under the Direct Tax Vivad se Vishwas Rules, 2020, the Central Board of Direct Taxes (CBDT) has notified a formalised procedure for furnishing of online application in Form-1 and Form-2 on 19^th March 2020.

The department has made operational the online filing facility for taxpayers (willing to avail the direct tax dispute resolution mechanism) through the e-filing portal of Income-tax website.

Lately, the CBDT has also notified different jurisdictional Principal Commissioner of Income Tax/ Commissioner of Income Tax to act as the ‘designated authorities’ under the Direct Tax Vivad se Vishwas Act, 2020. This is done to provide a mechanism to resolve disputes under the Income Tax Act, 1961 in respect of the declarants/taxpayers over whom the jurisdiction of various designated authorities is exercised.

This dispute settlement procedure is executed through the following forms:

Form-1: Form for filing declaration by eligible assesses to the designated authority

Form-2: An undertaking under Section 4(5) of the direct tax Vivad se Vishwas Act, 2020 to be submitted by the declarants waiving the right to seek or pursue any remedy or any claim in relation to tax arrears under any law

Form-3: Form for Certificate under Section 5(1) of the direct tax Vivad se Vishwas Act, 2020 (issue of an order by DA directing the taxpayer to make payment of the sum payable after adjusting the amounts already paid)

Form-4: Intimation of Payment under Section 5(2) of the direct tax Vivad se Vishwas Act, 2020 by the taxpayer to the concerned DA

Form-5: Order for Full and Final Settlement of Tax Arrear under Section 5(2) read with Section 6 of the Direct Tax Vivad Se Vishwas Act, 2020 (granting of immunity and specifying the details of dispute settlement)

Amount payable under the Scheme as clarified by FAQs on Vivad se Vishwas

The amount of tax to be paid under the Vivad se Vishwas scheme in relation to any appeals/writ/SLP/arbitration filed by the assessee is as follows:

Dispute relating to	Payable before March 31, 2020	Additional amount payable after March 31, 2020 (the scheme is valid only up to 30th June 2020)
Payment of tax	100% amount of disputed tax (or 125% in search cases). Any interest or penalty associated with such tax will be waived.	(i) 10% of the amount of disputed tax or (ii) interest and penalty relating to that tax, whichever is lower (i.e. 110% in total or 135% in search cases)
Payment of fee, interest or penalty	25% of the amount under such dispute	Another 5% of the amount under such dispute (i.e. 30% in total)

Few significant clarifications contained in FAQs on Vivad se Vishwas

The answers to multiple questions pertaining to various provisions of the Vivad se Vishwas Bill are likely to address the most sought-after issues raised by the taxpayers who intend to realize substantial benefits from the said scheme. Some of the important FAQs on Vivad se Vishwas Bill, as contained in the CBDT circular include:

Disputed tax already paid: An important point covered in the ‘FAQs on Vivad se Vishwas Bill’ mentions that the scheme is equally applicable to appeals where the appellant has already paid the disputed tax demand including any interest amount. Thus, where a taxpayer availing the Vivad se Vishwas settlement scheme has already paid the disputed tax while the litigation is on-going, he will be entitled to receive a refund of the amount paid in excess of the tax which falls payable under the scheme.

Outer time-limit for paying disputed taxes after filing of declaration: Among 55 FAQs on Vivad se Vishwas Bill issued by the department, another major one states that a declarant needs to deposit the disputed tax amount within a period of 15 days after the tax liability is assessed by the designated authority (DA) under the said scheme. For this, the DA is also required to determine the amount payable by the declarant within 15 days from the date of receipt of the declaration and will grant a certificate to the declarant comprising details of the tax-arrear and the amount payable after such determination. The CBDT will instruct the DAs to grant a certificate at an early date so as to ensure that the appellant is able to pay the amount on or before March 31, 2020, and can avail the benefit of reduced payment to settle the tax dispute.

Not necessary for the tax demand to be in arrears: To be eligible for attaining the benefits of Vivad se Vishwas scheme, it is immaterial as to whether the appellant has tax demand in arrears as at the date of filing declaration or whether the outstanding tax has been paid either partly or fully.

Applicability on Section 234E and 234F appeals: The appellant is eligible to file a declaration under Vivad se Vishwas scheme in respect of appeals against imposition of fees under Sections 234E or 234F for the delay in filing of returns. The amount payable under the scheme will be 25% or 30% of the disputed fee, as the case may be. Moreover, the tax authorities have also clarified that if fee u/s 234E or 234F pertains to a year in which there is disputed tax, then the settlement of disputed tax shall not be inferred to mean the settlement of disputed fee. Therefore, the assessee would have to settle the disputed fee separately in accordance with the applicable provisions of Vivad se Vishwas scheme.

Institution of prosecution: Where prosecution has been instituted against an assessee and is pending in a court of law, the assessee will not be eligible for the Vivad se Vishwas scheme. However, where only notice for initiation of prosecution has been issued with reference to tax arrears, the assessee has a choice to compound the offence and opt for Vivad se Vishwas scheme.

Only disputes relating to income tax: It has been clarified by the CBDT that the Vivad se Vishwas scheme does not apply to wealth tax, security transaction tax (STT), commodity transaction tax (CTT) and equalisation levy; and only disputes relating to income-tax are covered.

Appeals filed after 31^st January 2020: If the due date of filing appeal is after 31^st January 2020 and as a result, the appeal has not been filed on or before such date, then such case will also be eligible for the Vivad se Vishwas scheme subject to the constraints laid down therein. In addition, the tax department also makes an attempt to elucidate that if an appeal is lodged before High Court and is pending for admission as at 31^st January 2020, then such case will also be eligible for the Vivad se Vishwas scheme.

Applicability on search and seizure cases: This scheme can also be availed of in cases of search and seizure operations related to an assessment year provided the recovery amount is up to Rs. 5 crores in that particular year. The assessment cases of search and seizure will be precluded from being undertaken under this scheme if the amount of disputed tax exceeds Rs. 5 crore rupees in a relevant assessment year.

Cases in arbitration: Further, the scheme also applies to those cases which are pending in arbitration even if no appeal is pending. In this case, the disputed tax amount shall be a tax (including surcharge and education cess) on the disputed income with reference to which arbitration has been instituted.

Cases pending before AAR: The scheme shall not entertain disputes lying pending before the Authority of Advance Ruling (AAR). However, if the AAR has ascertained the total income and the order has been challenged in High Court, it shall come under the ambit of the scheme. In this case, the disputed tax shall be computed as per the order of the AAR and accordingly, wherever required, a consequential order shall be passed by the Assessing Officer.

Disputed interest when there is no dispute on taxes: Declarations concerning disputed interest amount (if there is no pending dispute on tax in correspondence with such interest) are also eligible for seeking benefit under the Vivad se Vishwas scheme. It is also clarified here that if there is a dispute on the tax amount, and a declaration is filed for such disputed tax, the complete quantum of interest levied or leviable on the disputed tax will be waived.

Amount to be paid for appeals/writ/SLP filed by the Income Tax Department: In such cases, the amount of tax to be paid by an assessee under the scheme is as follows:

Dispute relating to	Payment is made till March 31, 2020	Payment is made after March 31, 2020
Dispute related to tax	50% of the disputed tax (62.5% in search cases)	55% of the disputed tax (67.5% in search cases)
Dispute related to penalty, interest or fee only	12.5% of the disputed penalty, interest or fee	15% of the disputed penalty, interest or fee

These FAQs on Vivad se Vishwas are available on the Income Tax official website as under:

circular_no_7_2020

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