Budget 2021-22 + FINANCE Bill, 2021

Clarification regarding the scope of Vivad se Vishwas Act, 2020

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 Direct Tax Vivad se Vishwas Act, 2020 (hereinafter referred to as ‘VsV‘) was enacted on 17th March, 2020.

The settlement provisions under the Income-tax Act, 1961 (Income-tax Act) provide for an alternate mechanism to a taxpayer who chooses to exit the regular process of assessment which would have resulted into determination of tax liability and instead approached the Income Tax Settlement Commission (ITSC) for settlement of his case under Chapter XIX-A of the Income-tax Act. As the VsV 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, such cases as are covered by Chapter XIX-A of the Income-tax Act (whether they have attained finality or not) have always been, therefore, intended to be outside the purview of VsV.

With a view to remove any ambiguity, it is proposed to amend the provisions of VsV to clarify the original legislative intent for which the definitions of “appellant” in section 2(1)(a), “disputed tax” in section 2(1)(j) and “tax arrear” in section 2(1)(o), of the VsV are proposed to be amended by way of removal of doubts by this Bill.

The said amendments are proposed to take effect retrospectively from the 17th March 2020.

[Clause 160]

 

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Full Text:

Budget 2021-22 + FINANCE Bill, 2021

Scope of Vivad se Vishwas Act clarified to exclude cases settled under IT settlement mechanism, with retrospective amendment. The Finance Bill clarifies that the Vivad se Vishwas Act, 2020 does not cover taxes arising from settlements under Chapter XIX-A of the Income-tax Act; amendments to the definitions of 'appellant,' 'disputed tax,' and 'tax arrear' in VsV are proposed to expressly exclude Chapter XIX-A cases and to operate retrospectively from 17 March 2020.