Page 27 - Budget_2020

Union Budget 2020
Direct Tax Vivad se Vishwas Scheme, 2020
Introduction:

Honourable Finance Minister Nirmala Sitharaman, in the Speech of Budget 2020-21, proposed to introduce The Direct Tax Vivad
se Vishwas Act, 2020 for dispute resolution related to direct taxes. The Direct Tax Vivad se Vishwas Bill, 2020 was introduced in the
Parliament on 5th February, 2020.

The proposed Act would provide opportunity for taxpayers to pay disputed taxes with waiver of penalty and interest and partial
waiver of pending penalties, interests, and fees. Honourable FM has declared that the Scheme would remain open until 30th June
2020.

Rationale:
Over the years, the pendency of appeals filed by taxpayers as well as Government has increased. This is due to the fact that the
number of appeals that are filed is much higher than the number of appeals that are disposed. As a result, a huge amount of disputed
tax arrears is locked-up in these appeals. Currently, there are 4,83,000 direct tax cases pending in various appellate forums i.e. CIT(A),
ITAT, High Court and Supreme Court. As on the 30th November, 2019, the amount of disputed direct tax arrears is ₹9.32 lakh
crores. Considering that the actual direct tax collection in the FY 2018-19 was ₹11.37 lakh crores, the disputed tax arrears constitute
nearly one-year direct tax collection. Thus, the scheme is proposed to reduce litigation and clear deadlocks in arrears.
Relevant Definitions

• Disputed Tax – Tax on Disputed Income + MAT/AMT on Disputed Income
• Disputed Income – Income relatable to disputed tax (for which appeal is been filed)
• Disputed Interest – Interest which is not charged on disputed tax and for which appeal has been filed (disputed fees and disputed
penalty shall be construed accordingly)
• Tax arrears – Disputed tax + disputed interest + disputed fee + disputed penalty

Amount payable
Tax Arrear Amount Payable
st st
On or Before 31 March 2020 On or After 1 April 2020
Disputed Tax and Interest & Amount of Disputed Tax Amount of Disputed Tax + 10%
Penalty on such Disputed Tax However, if the 10% exceeds the interest &
penalty on disputed tax, the excess shall be
ignored
Disputed Interest, Disputed 25% 30%
Penalty or Disputed Fee

Illustration:

For A Y 2017-18, A Pvt Ltd filed its return of income offering Rs. 1,00,00,000 of total income. The total tax paid on the total income
was Rs. 20,00,000. At the time of assessment, the Assessing Officer disallowed claims of Rs. 40,00,000 – out of which A Pvt Ltd
preferred an appeal for Rs. 30,00,000. The tax on the appealed amount of Rs. 30,00,000 was Rs. 7,00,000 including interest of Rs.
50,000 u/s 234B. The disallowance further resulted in additional interest of Rs. 1,00,000 out of which Rs. 60,000 was relating to
appealed amount of Rs. 30,00,000. A Pvt Ltd has preferred an appeal to CIT(A) of the entire amount of Rs. 7,60,000 (Rs. 7,00,000
of disputed tax + Rs. 60,000 of additional interest). Compute the disputed tax, disputed interest amount and the amount to be paid
to opt for Vivad se Vishwas Scheme assuming no non-applicability and the application is made: -

- On 01.03.2020

- On 05.04.2020
Ignore MAT provisions.

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