the direct tax dispute resolution scheme, 2016

THE DIRECT TAX DISPUTE RESOLUTION SCHEME, 2016

1) Timeline Date of commencement June 1st

, 2016

Last date for filing the

declaration

Yet to be notified by CG in

Official Gazette

2) Definitions Declarant A person who makes the declaration under this

scheme.

Designated

Authority

Officer not below CIT and notified by the Principal

CIT for the purposes of this scheme.

Disputed

Income

Whole or so much of the total income of an

assessment year as is relatable to the “Disputed

Tax”.

Disputed

Tax

Tax determined as per the Income Tax Act or

Wealth Tax Act which is impunged by the assessee

or the declarant as the case may be.

Disputed

Wealth

Definition of Disputed Income shall apply here

mutatis mutandis.

Specified

Tax

Tax demands arising as a consequence of

retrospective amendments made to the Direct Tax

Regime read in consonance with the section 119 of

Finance Act 2012(Validation clause) and which are

disputed and are pending as on February 29th

,

2016.

Tax Arrear Amount of tax dues (includes interest, penalty)

determined under the Income/Wealth Tax Act(s),

in respect of which an appeal is pending before the

First Appellate Authority [Commissioner(Appeals)]

of the Acts mentioned herein as on February 29th

,

2016.

Other words

not defined

As per the relevant definitions of the applicable

Acts.

3) Declaration of tax

payable

Amount payable notwithstanding anything contained in any act for

the time being in force shall be:

1. Cases of pending appeal related to tax arrears being:

Tax and interest � Disputed tax upto 1,000,000 INR:

100% of such amounts till the

date of assessment or

reassessment.

� Other cases: 100% disputed tax;

25% of minimum penalty leviable

and interest on disputed tax till

the date of assessment or

reassessment.

Penalty 25% of the minimum penalty leviable

and interest on disputed tax till the

date of assessment or reassessment.

2. Specified Tax: Amount of such tax so determined.


4) Particulars to be

furnished

A. Declaration in prescribed form and manner.

B. Declarations in respect of tax arrears will render the appeals

before the First Appellate authority to be withdrawn (deemed)

in respect of disputed income/wealth as the case may be.

C. Declaration is in respect of the following cases and the declarant

has: � Filed an appeal to the First Appellate authority or any other further

appellate authority or Court(s) as the case may be, he shall withdraw his

appeals and furnish the proof of such along with the declaration filed.

� Initiated any proceeding for arbitration or other forms of settlement

recognized under any law for the time being in force he shall withdraw

the application in respect of such and furnish proof of such along with the

declaration filed.

D. Where declarations have been filed in respect of specified tax,

the declarant shall furnish an undertaking in the prescribed

manner, which states that he waives his right (direct or indirect)

to seek any of the remedies mentioned in point C) above or

otherwise.

E. Where it is found that the declarant has resorted to any

fraudulent means to make a declaration or has violated any

conditions in this scheme or any other manner which is violative

of the Scheme, it shall be deemed that the declaration was never

made and the provisions of the Income Tax Act and/or Wealth

Tax Act shall apply accordingly and the proceedings shall stand

revived.

F. Once a declaration has been made as per this Scheme, then no

authority shall have jurisdiction over the matters disclosed

therein.

5) Time and manner of

payment

A. Designated authority to determine the amount payable by the

declarant and grant a certificate within 60 days from the date of

receipt of the declaration setting forth the particulars of the tax

arrears or specified tax and the sum payable.

B. Declarant to pay the sum determined above within 30 days of

the receipt of the certificate and intimate such to the Designated

Authority.

C. Every order passed by the Designated Authority under point B)

shall be conclusive to the matters stated therein and such

matters cannot be reopened in any subsequent proceedings

under any law for the time being in force or under an agreement

entered into by India with any other country.


6) Immunity from

initiation of

proceedings in respect

of offence and

imposition of penalty

in certain cases

Subject to the conditions specified in point 5), the designated

authority shall grant:

� Immunity from instituting any proceedings for offences under the Income

Tax Act or Wealth Tax Act; or � Immunity from imposition or waiver of penalty under the acts mentioned

herein in respect of specified tax or tax arrear subject to limits specified. � Waiver of interest under the acts mentioned herein in respect of specified

tax or tax arrear subject to limits specified.

7) No refund of amount

paid under scheme

Any payment of dues shall be non-refundable. (Any excess payments

shall not be refunded back to the declarant. In simple words any

amount paid as dues under this scheme shall not be refundable in

any case.)

8) No other benefit,

concession or

immunity to declarant

Benefits, concessions or immunity under this scheme shall be

available only to the proceedings in relation to which declaration has

been made.


9) Scheme not to apply in

certain cases

The provisions of this scheme shall not apply: (Extract from the bill)

A. in respect of tax arrear or specified tax:

i. relating to an assessment year in respect of which an assessment has been made

under section 153A or 153C of the Income-tax Act or assessment or reassessment

for any of the assessment years, in consequence of a search initiated under section

37A or requisition made under section 37B of the Wealth-tax Act if it relates to any

tax arrear;

ii. relating to an assessment or reassessment in respect of which a survey conducted

under section 133A of the Income-tax Act or section 38A of the Wealth-tax Act, has

a bearing if it relates to any tax arrear;

iii. relating to an assessment year in respect of which prosecution has been instituted

on or before the date of filing of declaration;

iv. relating to any undisclosed income from a source located outside India or

undisclosed asset located outside India;

v. relating to an assessment or reassessment made on the basis of information

received under an agreement referred to in section 90 or section 90A of the

Income-tax Act, if it relates to any tax arrear;

B. to any person in respect of whom an order of detention has been made under

the provisions of the Conservation of Foreign Exchange and Prevention of

Smuggling Activities Act, 1974, provided that: i. such order of detention, being an order to which the provisions of section 9 or

section 12A of the said Act do not apply, has not been revoked on the report of the

Advisory Board under section 8 of the said Act or before the receipt of the report of

the Advisory Board; or

ii. such order of detention, being an order to which the provisions of section 9 of the

said Act apply, has not been revoked before the expiry of the time for, or on the

basis of, the review under sub-section (3) of section 9, or on the report of the

Advisory Board under section 8, read with sub-section (2) of section 9, of the said

Act; or

iii. such order of detention, being an order to which the provisions of section 12A of

the said Act apply, has not been revoked before the expiry of the time for, or on the

basis of, the first review under sub-section (3) of that section, or on the basis of the

report of the Advisory Board under section 8, read with sub-section (6) of section

12A, of the said Act; or

iv. such order of detention has not been set aside by a court of competent jurisdiction;

C. to any person in respect of whom prosecution for any offence punishable under

the provisions of the Indian Penal Code, the Unlawful Activities (Prevention)

Act, 1967, the Narcotic Drugs and Psychotropic Substances Act, 1985, the

Prevention of Corruption Act, 1988 or for the purpose of enforcement of any

civil liability has been instituted on or before the filing of the declaration or such

person has been convicted of any such offence punishable under any of those

Acts;

D. to any person notified under section 3 of the Special Court (Trial of Offences

Relating to Transactions in Securities) Act, 1992.

10) Power of Government

to issue directions, etc.

CG may from time to time, issue such directions or orders for proper

administration of this scheme. However a direction cannot be issued

to any designated authority for disposing off a particular case in a

particular manner.

11) Power to remove

difficulties

CG may by notification in Official Gazette not inconsistent make rules

to remove the difficulty.

12) Power to make rules CG may by notification in Official Gazette make rules for carrying out

the provisions of the Act.


Why is the Direct Tax Dispute Resolution Scheme introduced? (Relevant extract from the Finance Minister’s Budget Speech, 2016)

A STEP TOWARDS REDUCING LITIGATIONS: Litigation is a scourge for a tax friendly regime and creates an environment of distrust in addition to increasing the

compliance cost of the tax payers and administrative cost for the Government. There are about 3 lakh tax cases pending

with the 1st Appellate Authority with disputed amount being 5.5 lakh crores. In order to reduce this number, I propose

a new Dispute Resolution Scheme (DRS).

THE RETROSPECTIVE TAXATION ISSUE: I had in my Budget speech of July, 2014 assured that this Government would not retrospectively create a fresh tax

liability. I had also hoped then that the cases pending in various courts and other legal for a relating to certain

retrospective amendments undertaken to the Income-tax Act, 1961, through the Finance Act, 2012 will soon reach their

logical conclusion. I would like to reiterate that we are committed to provide a stable and predictable taxation regime.

We will not resort to such amendments in future. I had also announced constitution of a High Level Committee which would

oversee any fresh case where the assessing officer proposes to assess or reassess the income in respect of indirect

transfers by applying the retrospective amendment. In order to allay any fears of tax adventurism, this Committee will

now be chaired by the Revenue Secretary and consist of Chairman, CBDT and an expert from outside. This Committee will

effectively oversee the implementation of the assurances.

THE PROPOSAL: In order to give an opportunity to the past cases which are ongoing under the retrospective amendment, I propose a one-

time scheme of Dispute Resolution for them, in which, subject to their agreeing to withdraw any pending case lying in any

Court or Tribunal or any proceeding for arbitration, mediation etc. under BIPA, they can settle the case by paying only

the tax arrears in which case liability of the interest and penalty shall be waived.

NON-APPLICABILITY OF THE SCHEME IN CERTAIN CASES: (Extract from the Memorndum explaining the

Finance Bill, 2016) � 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 Double Taxation Avoidance Agreement under section 90 or 90A of

the Income-tax Act where the declaration is in respect of tax arrears.

� Person notified under Special Courts Act, 1992.

� Cases covered under Narcotic Drugs and Psychotropic Substances Act, Indian Penal Code, Prevention of

Corruption Act or Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974.

the direct tax dispute resolution scheme, 2016

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