Finance Bill, 2021 has provided clarification regarding the scope of the Direct Tax Vivad Se Vishwas Act, 2020 to exclude an appellant in whose case a writ petition or special leave petition or any other proceeding has been filed before an appellate forum, arising out of an order of the Settlement Commission and such petition or appeal is either pending or is disposed of. Similarly, the term disputed tax does not include any sum payable under an order passed by the Settlement Commission.
With a view to remove any ambiguity, it is proposed to amend the provisions of the Direct Tax Vivad Se Vishwas Act, 2020 to clarify the original legislative intent for which the definitions of “appellant” in clause (a), “disputed tax” in clause (j) and “tax arrear” in clause (o) of sub- section (1) of section 2 of the Direct Tax Vivad Se Vishwas Act, 2020 are proposed to be amended by way of removal of doubts by this Finance Bill, 2021.
The amendments relating to the Direct Tax Vivad Se Vishwas Act, 2020 are proposed to take effect retrospectively from the 17th March, 2020.
The provisions of the Direct Tax Vivad Se Vishwas Act, 2020 is proposed to be amended vide Clause 160 of the Finance Bill, 2020.
PART XIV
AMENDMENT TO THE DIRECT TAX VIVAD SE VISHWAS ACT, 2020
Amendment of Act 3 of 2020.
160. In the Direct Tax Vivad se Vishwas Act, 2020, the following amendments shall be made and shall be deemed to have been made with effect from the 17th day of March, 2020, namely:––
(a) in section 2, in sub-section (1),–
(i) in clause (a), the following Explanation shall be inserted, namely:—
‘Explanation.—For the removal of doubts, it is hereby clarified that the expression “appellant” shall not include and shall be deemed never to have been included a person in whose case a writ petition or special leave petition or any other proceeding has been filed either by him or by the income-tax authority or by both before an appellate forum, arising out of an order of the Settlement Commission under Chapter XIX-A of the Income-tax Act, and such petition or appeal is either pending or is disposed of.’;
(ii) in clause (j), after the second proviso, the following Explanation shall be inserted, namely:—
‘Explanation.––For the removal of doubts, it is hereby clarified that the expression “disputed tax”, in relation to an assessment year or financial year, as the case may be, shall not include and shall be deemed never to have been included any sum payable either by way of tax, penalty or interest pursuant to an order passed by the Settlement Commission under Chapter XIX-A of the Income-tax Act.’;
(iii) in clause (o), the following Explanation shall be inserted, namely:––
‘Explanation.––For the removal of doubts, it is hereby clarified that the expression “tax arrear” shall not include and shall be deemed never to have been included any sum payable either by way of tax, penalty or interest pursuant to an order passed by the Settlement Commission under Chapter XIX-A of the Income-tax Act.’.
Part XIV of the Bill deals with amendments to the Direct Tax Vivad Se Vishwas Act, 2020 (the Vivad se Vishwas Act). With the objective of reducing pending income tax litigation, generating timely revenue for the Government and giving benefit to taxpayers by providing them peace of mind, certainty and savings on account of time and resources, the Vivad se Vishwas Act was enacted on the 17th March, 2020.
The settlement provisions under the Income-tax Act, 1961 provide for an alternate mechanism to a taxpayer who chooses to exit the regular process of assessment which would have resulted in determination of tax liability and instead approached the Settlement Commission for settlement of his case under Chapter XIX-A of the Income-tax Act, 1961. As the Vivad se Vishwas Act was enacted for the resolution of disputed tax and not for the taxes covered by an order in pursuance to the settlement of a case under Chapter XIX-A of the Income-tax Act, 1961, such cases as are covered by Chapter XIX-A of the Income-tax Act, 1961 (whether they have attained finality or not) have always been, therefore, intended to be outside the purview of the Vivad se Vishwas Act.
Amended Provisions of the Direct Tax Vivad se Vishwas Act, 2020 Explained
Clause 160 of the Bill seeks to amend section 2 of the Direct Tax Vivad Se Vishwas Act, 2020 relating to definitions.
It is proposed to make the following amendments in sub-section (1) of the said section, namely:–
(i) clause (a) of the said sub-section provides the definition of appellant. It is proposed to amend the said clause by inserting an Explanation for the removal of doubts, to clarify that the expression “appellant” shall not include and shall be deemed never to have been included a person in whose case a writ petition or special leave petition or any other proceeding has been filed either by him or by the income-tax authority or both, before an appellate forum arising out of an order of Income-tax Settlement Commission under Chapter XIX-A of the Income-tax Act, and such petition or appeal is either pending or is disposed of;
(ii) clause (j) of said sub-section provides definition of disputed tax. It is further proposed to amend the said clause by inserting an Explanation for the removal of doubts, to clarify that the expression “disputed tax”, in relation to an assessment year or financial year, as the case may be, shall not include and shall be deemed never to have been included any sum payable either by way of tax, penalty or interest pursuant to an order passed by the Income-tax Settlement Commission under Chapter XIX-A of the Income-tax Act; and
(iii) clause (o) of the said sub-section provides for the definition of the expression “tax arrear”. It is proposed to amend the said clause by inserting an Explanation for removal of doubts to clarify that the expression “tax arrear” shall not include and shall be deemed never to have been included any sum payable either by way of tax, penalty or interest pursuant to an order passed by the Settlement Commission under Chapter XIX-A of the Income-tax Act.
These amendments will take effect retrospectively from 17th March, 2020.
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