JCIT/CIT (Appeals
Tax disputes hassle firms – The Hindu BusinessLine
Clipped from: https://www.thehindubusinessline.com/opinion/tax-disputes-hassle-firms/article69124581.ece
India Inc seeks quick resolution of pending cases
The Finance Minister in her last Union Budget had proposed a complete overhaul of the Income Tax Act to make it more concise, lucid, easy to understand so as to reduce litigation and foster certainty. This exercise is currently underway. In the interim, Union Budget 2025 presents an opportunity for the FM to address some of the burning corporate tax issues and, thereby, facilitate ease of doing business.
In recent times, while initiatives like ‘Make in India’ and ‘Atmanirbhar Bharat’ have boosted manufacturing activity, there is still a need for tax incentives to encourage investments in the manufacturing sector. Reintroducing the benefit of lower corporate tax rate of 15 per cent for new manufacturing companies and weighted deduction for R&D in advanced technologies could spur innovation and growth in the economy.
A pressing concern for corporates is the tax disputes landscape. The nation’s tax litigation system is under immense strain, with cases pending adjudication at various appellate forums and courts. As per CBDT Action Plan for FY 2024-25, around 5.49 lakh cases are pending just with JCIT/CIT (Appeals). After travelling through the different appellate forums, cases can take as long as 20-25 years to attain finality, thereby posing significant challenges to taxpayers’ financial strategies and the government’s revenue collection efforts. This grave situation underscores an urgent need for reforms aimed at accelerating the dispute resolution process.
To address this issue, the FM should implement mandatory timelines for the disposal of appeals, similar to the Dispute Resolution Panel mechanism. For the existing backlog of appeals which are pending for more than three years, instructions should be issued to dispose them within six months. Appeals which are pending for 1-3 years should be disposed of within one year. Further, the law should be amended to impose a timeline of one year for disposal of new appeals.
One dispute resolution mechanism for foreign investors is the Board for Advance Rulings (BAR). Unfortunately, this mechanism has not achieved the desired results. Also, making the BAR order appealable before the High Court goes against the objective of providing tax certainty to taxpayers. For the advance ruling mechanism to really work as an effective mechanism, the FM needs to consider a complete overhaul of the BAR system.
Over the years, the time limit to file belated or revised tax returns has been considerably reduced. So much so that, in case of corporates subject to transfer pricing, there is a window of only one month between the due date to file the original and revised/belated tax return. This leaves the taxpayers with a very limited time to rectify errors, if any, or consider any additional information received by them post filing of the original tax return. In view thereof, there is a need to rationalise the time limit to file belated or revised tax return by extending it to at least the end of the Assessment Year.
Simplify TDS regime
India’s Tax Deducted at Source (TDS) regime has become increasingly burdensome for taxpayers, with 35 provisions covering various transaction categories, leading to lot of interpretation issues and unnecessary disputes. There is a pressing need to simplify the TDS regime and streamline TDS rates by reducing them to just 3 or 4 rates of TDS across different categories of transactions. Taxpayers also call for TDS credit to be granted based on amounts reflected in Form 26AS, eliminating the complex reconciliation process with their accounting records, which is quite challenging and time consuming.
Corporates are hopeful the upcoming Budget will initiate reforms that will stimulate the economy move forward towards achieving our vision of becoming Viksit Bharat.
Parekh is Partner, Tax, KPMG in India, and Mehta is a chartered accountant. With inputs from Pratik Soni, chartered accountant
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