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Business News/ Politics / Policy/  Government to focus on reducing tax litigation
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Government to focus on reducing tax litigation

Govt will also clarify on indirect transfer provisions which will help avoid litigation such as the case involving Vodafone

Speaking at an interactive post-budget session organized by CII, revenue secretary Shaktikanta Das said discretion is not good in any transparent system. Photo: Ramesh Pathania/Mint (Ramesh Pathania/Mint)Premium
Speaking at an interactive post-budget session organized by CII, revenue secretary Shaktikanta Das said discretion is not good in any transparent system. Photo: Ramesh Pathania/Mint
(Ramesh Pathania/Mint)

New Delhi: The government will focus on reducing tax litigation even as the budget announced steps to reduce discretionary powers of taxmen, government officials said on Tuesday.

Speaking at a post-budget session organized by lobby group Confederation of Indian Industry (CII), revenue secretary Shaktikanta Das said discretion is not good in any transparent system. “Enough safeguards will be provided to ensure that no steps are taken to vitiate the environment by the tax department," he said.

One of the main reasons for the government’s decision to gradually phase out exemptions to the corporate sector is to reduce litigation, he said. “We will start with phasing-out of exemptions from the next budget. In the meantime, we will release a road map in 2015-16 for phasing-out of the exemptions," he said.

As exemptions are phased out, the concept of minimum alternate tax will become irrelevant, Anita Kapur, chairperson of the Central Board of Direct Taxes (CBDT), said at a press briefing.

The budget had clearly spelt out steps like provisions on search and seizure in the legislation to reduce discretionary action, she pointed out, adding the board will also try to bunch together cases to ensure faster disposal of cases by courts. In this finance bill, there is a clause that says that the tax department will wait for the apex court to take a stand on a particular issue and then decide on appealing similar cases in higher courts.

In addition, the government will clarify through a circular on indirect transfer provisions that dividend payments between two overseas companies with related assets in India will not be taxable in India.

These provisions will help in avoiding litigations like the income-tax department’s prolonged battle with Vodafone Plc.

“There is confusion over taxability of dividends between two overseas entities when there are related assets in India under section 9(1) of the income-tax act. We will issue a clarification to keep these out from indirect transfers net," she said.

On black money, Kapur said that besides the new law that is being drafted, the government will also strengthen the benami bill provisions to ensure effective confiscation of assets. In the new bill being considered by the National Democratic Alliance government to bring to task tax evaders who have stashed unaccounted wealth overseas, the onus will be on suspected evaders to prove the legitimacy of overseas assets.

Under the proposed law, concealment of income and assets and evasion of tax in relation to foreign assets will be subject to jail term of upto 10 years.

The steps taken by the income tax department are welcome, said B.M. Singh, former chairman of CBDT.

“Bunching up of cases will go a long way in reducing litigation. In cases where the Supreme Court has ruled, the tax department can choose to withdraw their appeals in similar cases," he said.

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Published: 03 Mar 2015, 01:41 PM IST
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