New tax appeal rules will bring down litigation, say experts
New tax appeal rules will also reduce the cost of recovering tax dues and help in improving the ease of doing business in the country
New Delhi: The higher threshold the finance ministry announced on Wednesday for filing appeals over tax disputes is set to lower the load on tribunals and courts, reduce litigation and free up officials to focus on high-value cases, tax experts said.
The increase in the threshold for filing appeals is the sharpest in the case of the Supreme Court from from Rs25 lakh to Rs1 crore. In the case of tribunals, this has been doubled from Rs10 lakh to Rs20 lakh, and in the case of high courts, the threshold is now Rs50 lakh instead of Rs20 lakh earlier.
“In 2015, when the government increased the monetary limit, the income tax department has withdrawn 17,000 cases pending in various appellate courts having a tax effect less than the monetary limit prescribed in that year. The latest step of the government to increase the existing threshold will further reduce pending litigation ," said Gopal Bohra, partner, N.A Shah Associates LLP. The move will also minimise litigation and will smoothen the functioning of the appellate courts, Bohra said.
The Narendra Modi-led government had promised a non-adversarial tax regime when it came to power in 2014 and took steps to reduce tax disputes relating to cross-border transactions within large corporate groups, which had seen an increase in previous years. The Central Board of Direct Taxes (CBDT) has also instructed field officers not to routinely file appeals in disputes. To address the issue of differing interpretations of complex provisions in the law, the government is working on a new direct tax code. It has also set annual targets for commissioners handling appeals, the first level of appeal for a taxpayer, to decide on cases.
Vijay Iyer, national leader, transfer pricing, EY India, described the latest move as a bold and sensible one. “There are a lot of small value cases pending in courts and tribunals which are blocking the entire litigation system. The taxpayer spends a lot of money to fight these cases," said Iyer.
The indirect tax administration, too, has taken steps to cut down litigation, including not filing appeals if the tax authority has lost the case in two stages of appeal.
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