Just a moment...

Top
Help
×

By creating an account you can:

Logo TaxTMI
Call Us / Help / Feedback

Contact Us At :

E-mail: [email protected]

Call / WhatsApp at: +91 99117 96707

For more information, Check Contact Us

FAQs :

To know Frequently Asked Questions, Check FAQs

Most Asked Video Tutorials :

For more tutorials, Check Video Tutorials

Submit Feedback/Suggestion :

Email :
Please provide your email address so we can follow up on your feedback.
Category :
Description :
Min 15 characters0/2000
Make Most of Text Search
  1. Checkout this video tutorial: How to search effectively on TaxTMI.
  2. Put words in double quotes for exact word search, eg: "income tax"
  3. Avoid noise words such as : 'and, of, the, a'
  4. Sort by Relevance to get the most relevant document.
  5. Press Enter to add multiple terms/multiple phrases, and then click on Search to Search.
  6. Text Search
  7. The system will try to fetch results that contains ALL your words.
  8. Once you add keywords, you'll see a new 'Search In' filter that makes your results even more precise.
  9. Text Search
Add to...
You have not created any category. Kindly create one to bookmark this item!
Create New Category
Hide
Title :
Description :
❮❮ Hide
Default View
Expand ❯❯
Close ✕
🔎 TMI Notes - Adv. Search
TEXT SEARCH:

Press 'Enter' to add multiple search terms. Rules for Better Search

Search In:
Main Text + AI Text
  • Main Text
  • Main Text + AI Text
  • AI Text
Law:
---- All Laws----
  • ---- All Laws----
  • Benami Property
  • Bill
  • Central Excise
  • Companies Law
  • Customs
  • DGFT
  • FEMA
  • GST
  • GST - States
  • IBC
  • Income Tax
  • Indian Laws
  • Money Laundering
  • SEBI
  • SEZ
  • Service Tax
  • VAT / Sales Tax
Types:
---- All Types ----
  • ---- All Types ----
  • Act Rules
  • Case Laws
  • Circulars
  • Manuals
  • News
  • Notifications
Sort By: ?
In Sort By 'Default', exact matches for text search are shown at the top, followed by the remaining results in their regular order.
RelevanceDefaultDate
    Electronic Communication (E-Service) of Show Cause Notices on the GST Portal: Limits of Validity and...
    Electronic Credit Ledger and Revenue Protection: A Strict Construction of Rule 86A under the CGST Re...
    Case LawsIncome Tax
    Search, Seizure, and Total Income: Interpreting Section 153A in Light of Incriminating Material - 20...
    Case LawsCustoms
    Writ Jurisdiction and Alternative Remedies: Bypassing Statutory Mechanisms: Limits of Article 226 Wh...
    Input Tax Credit (ITC) denial on Share Buybacks under GST: Furtherance of Business vs. Statutory Exc...
    Deeming Fictions and ITC Reversal: Gujarat AAAR on Mutual Fund Transactions as Exempt Supplies
    Show Cause, Don't Pre-Determine: Judicial Scrutiny of Section 74 Notices under the TNGST Act / CGST ...
    Case LawsBenami Property
    Benami Attachments and the Collapse of Precedent: Tribunal's Response to the Ganpati Dealcom Review
    Case LawsCentral Excise
    Dead Credits and Transitional Limits: CESTAT Larger Bench on Refund of Education and Krishi Kalyan C...
    Case LawsMoney Laundering
    Judicially Crafted SOP: Kerala High Court on Bank Powers to Freeze Suspicious Accounts under PMLA
    Case LawsIncome Tax
    Computer-Aided Scrutiny: Invalid Scrutiny Notices and CBDT Instructions: ITAT Kolkata Quashes Assess...
    Case LawsCustoms
    High Speed Diesel or Base Oil? Scientific Evidence, Expert Opinion and Tariff Interpretation under C...
    Case LawsIncome Tax
    Characterisation of Aircraft Leases under the India-Ireland DTAA: Operating Lease, Financial Lease, ...
    Case LawsMoney Laundering
    Cognizance, Custody and Complaints under PMLA: The Supreme Court's Integration of BNSS and CrPC Norm...
    Case LawsIncome Tax
    Rental of Aircraft in International Traffic: Dry Leasing and Permanent Establishment: Article 8(1) o...
    Case LawsIncome Tax
    MLI, PPT and Aircraft Leasing: Operating vs. Finance Lease and PE Risk in Aircraft Leasing: Reassess...
    E-Way Bills, Expiry and Intent (Mens Rea): Reassessing GST Penalties: Reading Sections 129 and 130 i...
    Case LawsMoney Laundering
    Arrest, Presumption, and Proceeds of Crime: A Holistic Analysis of PMLA Bail Jurisprudence in a GST-...
    Case LawsCustoms
    Classification of Wheel Loaders under Heading 8429: From Practice to Principle: Mining Use, HSN Note...
    Case LawsIncome Tax
    Limits of Revisional Jurisdiction: Adequate Enquiry, Limited Scrutiny, and the Proper Use of Section...
❯❯
MaximizeMaximizeMaximize
0 / 200
Expand Note
Add to Folder

No Folders have been created

    +

    Are you sure you want to delete "My most important" ?

    NOTE:

    Notes
    Showing Results for :
    Reset Filters
    Results Found:
    Show All SummariesHide All Summaries
    Case LawsGST
    Show AI Summary
    Electronic service of GST show cause notices must be in the prescribed portal location to ensure a real opportunity to be heard.
    Uploading an SCN only under a secondary portal compartment, rather than the primary prescribed location, does not constitute due communication; where an adverse decision is contemplated the Proper Officer must afford an opportunity of hearing, and defective electronic service that prevents participation vitiates the ensuing adjudication, permitting writ intervention to set aside and remit for proper notice and hearing.
    Case LawsGST
    Show AI Summary
    Electronic Credit Ledger blocking permitted only up to ITC actually available; negative balances and extra statutory recovery are impermissible.
    Rule 86A may be invoked only where input tax credit is actually available in the Electronic Credit Ledger at the time of the blocking order; the power permits disallowing debit equivalent to such available credit as a temporary preventive measure and does not authorize creation of negative ledger balances or serve as a recovery provision. Excess blocking beyond the ECL balance is ultra vires and recovery must proceed under the Act's substantive provisions.
    Case LawsIncome Tax
    Show AI Summary
    Search assessments under section 153A permit full reassessment for abated years but limit reopened completed years to incriminating search material.
    Section 153A's assessment power is search-linked: for abated years the AO may reassess total income afresh, but for completed/unabated years additions under section 153A are permissible only where specific incriminating material relating to that year is found during the search; absent such material, disturbance of a completed assessment must proceed, if at all, under sections 147-148 subject to their conditions.
    Case LawsCustoms
    Show AI Summary
    Customs appeals: High Court writs are generally restrained where a statutory High Court remedy exists and limitation lapsed.
    Where a statute provides a remedy to the High Court itself, the High Court will ordinarily decline writ intervention under Article 226 to avoid bypassing the statutory machinery; a litigant who has by his own default allowed the statutory limitation for a reference or appeal to lapse cannot ordinarily rely on Article 226 to cure that lapse, and claims of tribunal non consideration demand clear, specific, verified pleadings.
    Case LawsGST
    Show AI Summary
    Share buybacks and GST: expenses tied to buybacks are not eligible for ITC, and common ITC must be reversed.
    The authority held that shares are "securities" excluded from "goods" and "services," but section 17(3) and the Chapter V rules treat "transactions in securities" as part of the "value of exempt supply" for ITC apportionment; therefore GST paid on expenses directly related to a share buyback is not eligible as ITC under section 16(1), and common ITC attributable to both taxable operations and the buyback must be reversed using the prescribed deeming values.
    Case LawsGST
    Show AI Summary
    Mutual fund redemptions require proportionate ITC reversal under GST deeming provision; valuation set at 1% of sale value.
    A statutory deeming provision includes transactions in securities within the value of exempt supply for ITC apportionment; the Explanation to the input tax credit rules fixes the value of a security at 1% of its sale value, and redemption of mutual fund units is treated as a sale for this limited valuation purpose, requiring proportionate ITC reversal where common inputs serve both taxable operations and such investment transactions.
    Case LawsGST
    Show AI Summary
    GST extended-period proceedings require show cause notices to allege and disclose fraud or wilful misstatement.
    Extended limitation under GST is available only where the tax shortfall is "by reason of" fraud, wilful misstatement or suppression to evade tax; these are jurisdictional facts. Show cause notices must allege such conduct and disclose the material basis for that inference, and must specify proposed amounts without language of final determination. Invocation of extended limitation without these ingredients vitiates proceedings and precludes remand; authorities may pursue recovery under the normal limitation where applicable.
    Case LawsBenami Property
    Show AI Summary
    Benami property orders grounded on a recalled precedent must be re-adjudicated without treating that precedent as binding.
    The Tribunal held that where an adjudicatory order under the PBPTA is substantially founded on a Supreme Court judgment that has been recalled on review, that order cannot stand; the correct remedial course is to set aside and remit for de novo adjudication so the Adjudicating Authority may re-examine evidence and apply the law without treating the recalled Ganpati Dealcom decision as binding on the question of the amendments' temporal applicability.
    Case LawsCentral Excise
    Show AI Summary
    Transition of cess credits: abolished cess balances are dead credits, not eligible for GST transition or cash refunds.
    Unutilised Education Cess, Secondary & Higher Education Cess and Krishi Kalyan Cess balances whose utilisation was limited to the same cess and whose levies were abolished became dead CENVAT credits; they were not eligible for transition under the exhaustive list in Section 140 and its Explanations, and Section 142(3) only prescribes payment in cash where refund is otherwise due under existing law, not a new substantive right to refund or a means to evade pre GST limitation.
    Case LawsMoney Laundering
    Show AI Summary
    Bank account freezes: limited temporary freezes permitted on reasonable suspicion, with strict notice, review and three month cap.
    A narrow implied power exists for banks to impose a temporary debit freeze without prior notice when there are reasonable grounds to suspect use of an account for money laundering or cyber fraud; this power must be exercised with same day communication to the accountholder, mandatory intimation to investigative authorities with proof, a one week window for accountholder explanation and bank decision, and a maximum three month continuation absent directions from competent authorities, after which the freeze must be lifted and access to the credit balance restored.
    Case LawsIncome Tax
    Show AI Summary
    Section 143(2) notices not following CBDT formats invalidate ensuing scrutiny assessments; computer generation does not cure the defect.
    A scrutiny notice that does not conform to CBDT-prescribed formats-specifically by failing to specify whether selection is for limited, complete, or compulsory manual scrutiny-is not a valid jurisdictional notice; non compliance with the binding CBDT Instruction vitiates the Assessing Officer's authority and renders any consequent scrutiny assessment void ab initio. Computer generation of the notice does not cure the defect. A pure legal challenge to such notice validity may be admitted at the appellate stage where no new facts are required.
    Case LawsCustoms
    Show AI Summary
    Imported petroleum product: partial testing and non categorical reports cannot sustain classification as high speed diesel under tariff rules.
    Classification requires evidence addressing all IS 1460:2005 parameters or, where full conformity is lacking, a Rule 4 "most akin" analysis showing closest resemblance among candidate headings based on reliable, reasoned laboratory results and expert opinion; partial testing or non categorical reports do not suffice to support penal or confiscatory measures.
    Case LawsIncome Tax
    Show AI Summary
    Aircraft leases with no purchase option and retained lessor title remain operating leases, not interest-bearing financings.
    Where aircraft lease documentation preserves legal title in the lessor, imposes a return obligation without any purchase option or residual-payment mechanism, and regulatory treatment aligns with operating-lease norms, the arrangement constitutes an operating lease; absent an enforceable transfer of ownership to the lessee at term end, lease rentals cannot be re-characterised as interest for treaty purposes merely because of lease tenure or finance-like pricing.
    Case LawsMoney Laundering
    Show AI Summary
    PMLA complaints: BNSS imposes mandatory pre-cognizance hearing, affecting cognizance and arrest powers in money laundering cases.
    PMLA complaints are now governed by the general complaint-cognizance framework and, for complaints filed after BNSS commencement, by the corresponding BNSS provisions; the BNSS proviso requiring that the accused be given an opportunity to be heard before cognizance is mandatory, and failure to provide that opportunity invalidates the cognizance order. A scheduled predicate offence is a condition precedent to the existence of proceeds of crime and hence to PMLA liability, and once cognizance is taken, enforcement agencies' unilateral arrest powers against named accused are curtailed pending court-authorised custody.
    Case LawsIncome Tax
    Show AI Summary
    Aircraft leasing: treaty text treats rental income as taxable in the lessor's residence when aircraft form part of international traffic.
    Whether leased aircraft create a fixed place Permanent Establishment depends on the disposal test: operational control and the right to use and conduct business from the place must vest in the enterprise; mere ownership and protective inspection or repossession rights do not suffice. Profit attribution to any alleged PE requires a FAR based arm's length analysis under Article 7(2), and Article 8(1)'s express inclusion of "operation or rental" covers rental income from aircraft forming part of a fleet used in international traffic, allocating taxing rights to the State of residence.
    Case LawsIncome Tax
    Show AI Summary
    Aircraft leasing: MLI PPT not applicable without section 90(1) notification; operating leases and Article 8(1) allocate rental tax to Ireland.
    The Tribunal ruled that Articles 6-7 of the MLI cannot be applied against the India-Ireland DTAA without a specific section 90(1) notification; alternatively, the Revenue failed to show PPT-based abuse. Contractual and regulatory analysis classified the transactions as operating leases; no fixed place PE existed in India; and Article 8(1) allocates taxing rights on rental of aircraft in international traffic to Ireland.
    Case LawsGST
    Show AI Summary
    E-way bill expiry alone cannot prove intent to evade tax; penalties require material indicating actual evasion.
    Expiry or non-generation of an e-way bill, by itself, does not establish intent to evade tax; penal action for movement in contravention requires material indicating diversion, mis-declaration or other indicia of tax risk. Where genuine invoices, correct particulars and evidence explaining delay exist and any fresh e-way bill is produced prior to final orders, authorities must record reasoned findings on intent; absent such material, detention, seizure and confiscation regime cannot be sustained and such misapplication is reviewable on certiorari.
    Case LawsMoney Laundering
    Show AI Summary
    PMLA bail in GST-ITC syndicate case: High Court upholds arrest validity and denies bail under twin conditions.
    The High Court held the PMLA arrest valid because the authorised officer recorded written reasons to believe and furnished written grounds of arrest; it found prima facie involvement in money laundering from corroborated banking, corporate and recorded-statement evidence establishing foundational facts of proceeds of crime; the statutory presumption applied and shifted the burden to the accused; and the mandatory twin bail conditions were not satisfied given the alleged magnitude, sophistication and continuing nature of the GST-ITC fraud, so regular bail was refused.
    Case LawsCustoms
    Show AI Summary
    Wheel loaders classification: tribunal finds front end shovel loaders heading applies; no penalties without mala fide intent.
    Self propelled wheeled machines with front mounted buckets are classifiable under TI 8429 5100 as front end shovel loaders regardless of mining use; invocation of the extended period u/s 28(4) requires evidence of collusion, wilful mis statement or suppression with intent to evade duty, and long standing departmental acceptance plus full disclosure negates mala fides; misclassification or wrong exemption claim alone does not justify confiscation u/s 111(m) or penalties u/ss 114A/114AA without proof of knowingly false description or fraudulent conduct.
    Case LawsIncome Tax
    Show AI Summary
    Income tax revisional jurisdiction: if AO investigated, PCIT must decide merits or record specific investigative failure, not remand.
    Where the Assessing Officer has conducted enquiries and accepted the assessee's explanation, the revisional authority cannot remand the assessment on a generic claim of inadequate enquiry; it must either record an abject failure to investigate with specific findings or decide the issue on merits in the revisional order and demonstrate error and prejudice.

    TMI Notes

    Back

    All TMI Notes

    Showing Results for :
    Reset Filters
      No Records Found

      TMI Notes

      Back

      All TMI Notes

      whatsappJoin Channel
      Showing Results for : Reset Filters

      Introduction of concept of mediation and Advance Ruling System for Residents to reduce tax litigation and more clarity

      15 September, 2020

      Contents
      Plus +
      Summary
      Note

      Note

      -

      Bookmark

      Print

      Print

      2020 (9) TMI 496 - Supreme Court

      While decided an issue pertaining to AY 1976-77, honorable Supreme Court has wrote two postscript with the following note:

      We have been persuaded to write two postscripts on account of the backbreaking dockets which are ever increasing and as a move towards a trust between the Tax Department and the assessee, and we hope that both the aspects meet consideration at an appropriate level. [Para 21]

       

      Postscript 1:

      1. The Indian legal system is reeling under a docket explosion.

      The Government and public authorities are active contributories to this deluge. To top it, a number of litigations arise inter se the Government and its bodies and, thus, the only question, as stated in the beginning, is which pocket of the Government will be benefitted?

      2. The aforesaid position resulted in a judicial innovation with the Supreme Court passing orders in Oil and Natural Gas Commission & Anr. v. Collector of Central Excise [1991 (10) TMI 58 - Supreme Court] requiring that such cases must be referred to a Committee to be appointed by the Government to facilitate a resolution of such disputes and that no case should be filed without the approval of this Committee. This system was a failure as is apparent from the facts of the present case, where the SLP filed by the appellant-Corporation was initially dismissed with liberty to revive the same in case the High Powered Committee granted such a permission which was so granted in a meeting held on 14.08.2009. The said Committee discussed the legal ramifications, and in some way opined in favour of the appellant-Corporation, as is apparent from the discussion aforesaid. But the ball was again lobbed back into the Court to adjudicate the said issue rather than a resolution being reached. The result was only the revival of the appeal, and the consequent decision which has seen the light of the day only now.

      3. The aforesaid failure of the system resulted in the Supreme Court recalling its orders in the ONGC cases vide Electronics Corporation of India v. Union of India. [2011 (2) TMI 3 - Supreme Court].

      4. The Central Government and the State authorities have been repeatedly emphasising that they have evolved a litigation policy. Our experience is that it is observed more in breach. The approach is one of bringing everything to the highest level before this Court, so that there is no responsibility in the decision-making process – an unfortunate situation which creates unnecessary burden on the judicial system. This aspect has also been commented upon in a judgment of this Court in Union of India & Ors. v. Pirthwi Singh & Ors., [2018 (4) TMI 1586 - Supreme Court]   albeit between the Government and the private parties, where the question of law had been settled and yet the appeal was filed only to invite a dismissal. The object appears to be that a certificate for dismissal is obtained from the highest court so that a quietus could be put to the matter in the Government Departments. Undoubtedly, this is complete wastage of judicial time and in various orders of this Court it has been categorized as “certificate cases”, i.e., the purpose of which is only to obtain this certificate of dismissal.

      5. The 126th Law Commission of India Report titled ‘Government and Public Sector Undertaking Litigation Policy and Strategies’ debated the Government versus Government matters which weighed heavily on the time of the Courts as well as the public exchequer. This was as far back as in 1988. It was only in the year 2010 that the National Litigation Policy (for short ‘NLP’) was formulated with the aim of reducing litigation and making the Government an efficient and responsible litigant. Five (5) years later it reportedly saw a revision to increase its efficacy, but it has hardly made an impact. In the year 2018, the Central Government gave its approval towards strengthening the resolution of commercial disputes of Central Public Sector Enterprises (for short ‘CPSEs’)/ Port Trusts inter se, as well as between CPSEs and other Government Departments/Organisations. The aim was and is to put in place a mechanism within the Government for promoting a speedy resolution of disputes of this  kind, however it excluded disputes relating to Railways, Income Tax, Customs and Excise Departments. It has now been made applicable to all disputes other than those related to taxation matters. This was pursuant an order passed in The Commissioner of Income Tax (Exemptions) v. National Interest Exchange of India -SLP (C) Diary No. 35567 of 2019 [2020 (3) TMI 1250 - SC ORDER] by a bench of which one of us (Sanjay Kishan Kaul, J.) was a part.

      6. Insofar as non-taxation matters are concerned, the Administrative Mechanism for Resolution of CPSEs Disputes was conceptualised to replace the Permanent Machinery of Arbitration and to promote equity through collective efforts to resolve disputes. It has a two-tiered structure.

      7. At the first level, commercial disputes will be referred to the Committee comprising Secretaries of the Administrative Ministries/Departments to which the disputing parties belong and the Secretary, Department of Legal Affairs. In case the two disputing parties belong to the same Ministry/Department, the Committee will comprise Secretary of Administrative Ministry/Department concerned; the Secretary, Department of Legal Affairs and the Secretary, Department of Public Enterprises. If a dispute is between a CPSE and a State Government Department/Organisation, the Committee will comprise of the Secretary of the Ministry Department of the Union to which the CPSE belongs, the Secretary, Department of Legal Affairs and the Chief Secretary of the State concerned. Such disputes are ideally to be resolved at the first level itself within a time schedule of three (3) months, and in the eventuality of them remaining unresolved, the same may be referred to the Cabinet Secretary at the second level, whose decision will be final and binding on all concerned.

      8. We are of the opinion that one of the main impediments to such a resolution, plainly speaking, is that the bureaucrats are reluctant to accept responsibility of taking such decisions, apprehending that at some future date their decision may be called into question and they may face consequences post retirement. In order to make the system function effectively, it may be appropriate to have a Committee of legal experts presided by a retired Judge to give their imprimatur to  the settlement so that such apprehensions do not come in the way of arriving at a settlement. It is our pious hope that a serious thought would be given to the aspect of dispute resolution amicably, more so in the post-COVID period.

      9. In most countries, mediation has proved to be an efficacious remedy and here we are talking about mediation inter se the Government authorities or Government departments. India is now a signatory to the Singapore Convention on Mediation and we understand that a serious thought is being given to bring forth a comprehensive legislation to institutionalise mediation, in furtherance of this function to which India has committed itself.

      Postscript 2:

      10. We now turn to the issue of matters pertaining to CPSEs and Government authorities insofar as taxation matters are concerned,  because they are consistently sought to be carved out as a separate category of cases. One of the largest areas of litigation for the Government is taxation matters. The petition rate of the tax department before the Supreme Court is at 87%. - See ‘Economic Survey 2017-19 – Volume 1’ by the Department of Economic Affairs, Ministry of Finance, Government of India So, the question is can something be done about it?

      11. In our opinion, a vibrant system of Advance Ruling can go a long way in reducing taxation litigation. This is not only true of these kinds of disputes but even disputes between the taxation department and private persons, who are more than willing to comply with the law of the land but find some ambiguity. Instead of first filing a return and then facing consequences from the Department because of a different perception which the Department may have, an Advance Ruling System can facilitate not only such a resolution, but also avoid the tiers of litigation which such cases go through as in the present case. In fact, before further discussing this Advance Ruling System, we can unhesitatingly say that, at least, for CPSEs and Government authorities, there would be no question of taking this matter further once an Advance Ruling is delivered, and even in case of private persons, the scope of any further challenge is completely narrowed down.

      12. It is as far back as in 1971 that a report was submitted by the Direct Taxes Enquiry Committee under the Chairmanship of Dr. K.N. Wanchoo, recognising the need for providing Advance Ruling System, particularly in cases involving foreign collaboration. The aim was to give advance rulings to taxpayers or prospective taxpayers, which would then considerably reduce the Revenue’s workload and decrease the number of disputes. This finally resulted in a scheme of Advance Ruling being brought into effect in 1993, with the introduction of a new Chapter in the Income Tax Act, 1961 (hereinafter referred to as the ‘IT Act’). A quasi-judicial tribunal was established as the Authority for Advance Rulings (for short ‘AAR’) to provide certainty and avoid litigation related to taxation of transactions involving non- residents. The scope of the transactions on which an advance ruling can be sought from the AAR has gradually increased to now include both residents and non-residents, who can seek the same for issues having a substantial tax impact. Chapter XIX-B of the IT Act deals with advance rulings and it has been defined in Section 245N(a) of the  IT Act. These rulings are binding both on the Income Tax Department and the applicant, and while there is no statutory right to appeal, the Supreme Court has held in Columbia Sportswear Company v. Director of Income Tax Bangalore [2012 (8) TMI 105 - Supreme Court]  that a challenge an advance ruling first lies before the High Court, and subsequently before the Supreme Court. The advance ruling may be reversed in the event a substantial question of general public importance arises or a similar question is already pending before the Supreme Court for adjudication.

      13. The ground level situation is that this methodology has proved to be illusionary because there is an increasing number of applications pending before the AAR due to its low disposal rate and contrary to the expectation that a ruling would be given in six (6) months (as per Section 245R(6) of the IT Act), the average time taken is stated to be reaching around four (4) years!- See Deloitte Report on Advance Rulings in India: Delivering Greater Tax Certainty (Deloitte Tax Policy Paper 5, 2019)  There is obviously lack of adequate numbers of presiding officers to deal with the volume of cases. Interestingly, the primary reason for this is the large number of vacancies and delayed appointments of Members to the AAR. ibid In view of the time taken, the very purpose of AAR is defeated, resulting in the mechanism being used infrequently as is evident from the ever- increasing tax related litigation.

      14. We may notice a significant development in Section 245N of the IT Act. It was through Notification No.11456 dated 3.8.2000 that public sector companies were added to the definition of ‘applicant’, and in 2014, it was made applicable to a resident who had undertaken one or more transactions of the value of ₹ 100 crore or more.

      15. Insofar as a resident is concerned, the limit is so high that it cannot provide any solace to any individual, and we do believe that it is time to reconsider and reduce the ceiling limit, more so in terms of the recent announcement stated to be in furtherance of a tax friendly face-less regime!

      16. We may refer to the international scenario where there has been an incremental shift towards mature tax regimes adopting advance ruling mechanisms. The increase in global trade puts the rulings system at the centre-stage of a robust international tax cooperation regime. The Organisation for Economic Cooperation and Development (for short ‘OECD’) lists advance rulings as one of the indicators to assess trade facilitation policies, making it an aspirational international best practice standard. For example, Australia and New Zealand have a robust system of advance rulings wherein the decisions (which are public rulings affecting a large number of taxpayers) are given teeth by being made binding on the revenue authorities. New Zealand has gone a step further and innovated “status rulings” under which a taxpayer can apply to the Commissioner for a ruling on how a change in the law impacts an existing ruling.

      17. In the United States, there is a mechanism for the Treasury to authorise guidance in the form of revenue rulings, procedures and notices. The mechanism again, has been bolstered by subsequent practice and interpretations of the United States courts, where rulings have indicated that taxpayers may be penalised if they act inconsistently with legal interpretations set out in the revenue rulings, procedures or notices.

      18. Tax transparency has been a hallmark trait of the Swedish legal system. Swedish law requires public disclosure of ex ante tax administration such as advance rulings. Both the taxpayer as well as the Swedish Tax Agency can request an advance tax ruling, these rulings are published without information identifying the taxpayer that requested them. The Skatterättsnämnden, or the Council for Advance Tax Rulings is the Swedish Government agency which is vested with this power. The advance ruling system has played a crucial role in Sweden’s position as a country with one of the highest tax compliance rates in the world.

      19. The aim of any properly framed advance ruling system ought to be a dialogue between taxpayers and revenue authorities to fulfil the mutually beneficial purpose for taxpayers and revenue authorities of bolstering tax compliance and boosting tax morale. This mechanism should not become another stage in the litigation process.

      20. We, thus, consider it appropriate to recommend to the Central Government to consider the efficacy of the advance tax ruling system and make it more comprehensive as a tool for settlement of disputes rather than battling it through different tiers, whether private or public sectors are involved. A council for Advance Tax Ruling based on the Swedish model and the New Zealand system may be a possible way forward.

       


      Full Text:

      2020 (9) TMI 496 - Supreme Court

      Topics

      ActsIncome Tax