CBDT FAQ’s on Vivad se Vishwas Scheme were issued on March 5, 2020.  ‘Vivad se Vishwas’ Scheme was announced to provide for dispute resolution in respect of pending income tax litigation. Pursuant to Budget announcement, the Direct Tax Vivad se Vishwas Bill, 2020 (Vivad se Vishwas) was introduced in the Lok Sabha on 5th Feb, 2020. The objective of Vivad se Vishwas is to inter alia reduce pending income tax litigation, generate timely revenue for the Government and benefit taxpayers by providing them peace of mind, certainty and savings on account of time and resources that would otherwise be spent on the long-drawn and vexatious litigation process. Subsequently, based on the representations received from the stakeholders regarding its various provisions, official amendments to Vivad se Vishwas have been proposed. These amendments seek to widen the scope of Vivad se Vishwas and reduce the compliance burden on taxpayers.

After introduction of Vivad se Vishwas in Lok Sabha, several queries have been received from the stakeholders seeking clarifications in respect of various provisions contained therein. Government has considered these queries and decided to clarify the same in form of answers to frequently asked questions (FAQs). These clarifications are, however, subject to approval and passing of Vivad se Vishwas by the Parliament and receiving assent of the Hon’ble president of India.

Appeals covered under Vivad se Vishwas Scheme

CBDT FAQ Vivad se Vishwas Scheme Question No. 1. -Which appeals are covered under the Vivad se Vishwas?

Answer: Appeals pending before the appellate forum [Commissioner (Appeals), Income Tax Appellate Tribunal (ITAT), High Court or Supreme Court], and writ petitions pending before High Court (HC) or Supreme Court
(SC) or special leave petitions (SLPs) pending before SC as on the 31,st day of January, 2020 (specified date) are covered. Cases where the order has been passed but the time limit for filing appeal under the Income-tax Act, 1961 (the Act) against the order has not expired as on the specified date are also covered. Similarly, cases where objections
filed by the assessee against draft order are pending with Dispute Resolution Panel (DRP) or where DRP has given the directions but the Assessing Officer (AO) has not yet passed the final order on or before the specified date are also covered. Cases where revision application under section 264 of the Act is pending before the Principal
Commissioner or Commissioner are covered as well. Further, where a declarant has initiated any proceeding or given any notice for arbitration, conciliation or mediation as referred to in clause 4 of the Bill is also covered.

Question No. 2. If there is no appeal pending but the case is pending in arbitration, will the taxpayer be eligible to apply under Vivad se Vishwas? If yes what will be the disputed tax?

Answer: An assessee whose case is pending in arbitration is eligible to apply for settlement under Vivad se Vishwas even if no appeal is pending. In such case assessee should fill the relevant details applicable in his case in the
declaration form. The disputed tax in this case would be the tax (including surcharge and cess) on the disputed income with reference to which the arbitration has been filed.

Question No. 3. Whether Vivad se Vishwas can be availed for proceedings pending before Authority of Advance Ruling (AAR)? l.f a writ is pending against order passed by AAR in a HC will that case be covered and how disputed tax to be calculated?

Answer: Vivad se Vishwas is not available for disputes pending before AAR. However, if the order passed by AAR has determined the total income of an assessment year and writ against such order is pending in HC, the
appellant would be eligible to apply for the Vivad se Vishwas. The disputed tax in that case shall be calculated as per the order of the AAR and accordingly, wherever required, consequential order shall be passed by the AO. However, if the order of AAR has not determined the total income, it would not be possible to calculate disputed tax and hence such cases would not be covered. To illustrate, if AAR has given a ruling that there exists Permanent Establishment (PE) in India but the AO has not yet determined the amount to be attributed to such PE, such cases cannot be covered since total income has not yet been determined.

Question No. 4. An appeal has been filed against the interest levied on assessed tax; however, there is no dispute against the amount of assessed tax. Can the benefit of the Vivad se Vishwas be availed?
Answer: Declarations covering disputed interest (where there is no dispute on tax corresponding to such interest) are eligible under Vivad se Vishwas. It may be clarified that if there is a dispnte on tax amount, and a declaration is filed for the disputed tax, the full amount of interest levied or leviable related to the disputed tax shall be waived.

Question No. 5. What if the disputed demand including interest has been paid by the appellant while being in appeal?
Answer: Appeals in which appellant has already paid the disputed demand either partly or fully are also covered. If the amount of tax paid is more than amount payable under Vivad se Vishwas, the appellant will be entitled to refund without interest under section 244A of the Act.

Question No. 6. Can the benefit of the Vivad se Vishwas be availed, if a search and seizure action by the Income-tax Department has been initiated against a taxpayer?

Answer: Case where the tax arrears relate to an assessment made under section 143(3) or section 144 or section 153A or section 153C of the Act on the basis of search initiated under section 132 or section 132A of the Act
are excluded if the amount of disputed tax exceeds five crore rupees in that assessment year.

Thus, if there are 7 assessments of an assessee relating to search & seizure, out of which in 4 assessments, disputed tax is five crore rupees or less in each year and in remaining 3 assessments, disputed tax is more than five crore rupees in each year, declaration can he filed for 4 assessments where disputed tax is five crore rupees or less in each year.

Question No. 7. If assessment has been set aside for giving proper opportunity to an assessee on the additions carried out by the AO. Can he avail the Vivad se Vishwas with respect to such additions?

Answer: If an appellate authority has set aside an order (except where assessment is cancelled with a direction that assessment is to be framed de novo) to the file of the AO for giving proper opportunity or to carry out fresh
examination of the issue with specific direction, the assessee would be eligible to avail Vivad se Vis/mas. However, the appellant shall also be required to settle other issues, if any, which have not been set aside in
that assessment and in respect of which either appeal is pending or time to file appeal has not expired. In such a case disputed tax shall be the tax (including surcharge and cess) which would have been payable had the addition in respect of which the order was set aside by the appellate authority was to be repeated by the AO.

In such cases while filling the declaration fonn, appellant can indicate that with respect to the set-aside issues the appeal is pending with the Commissioner(Appeals).

Question No. 8. Imagine a case where an appellant desires to settle concealment penalty appeal pending before CIT(A), while continuing to litigate quantum appeal that has travelled to higher appellate forum. Considering these are two independent and different appeals, whether appellant can settle one to exclusion of others? If yes, whether
settlement of penalty appeal will have any impact on quantum appeal?

Answer: If both quantum appeal covering disputed tax and appeal against penalty levied on such disputed tax for an assessment year are pending, the declarant is required to file a declaration form giving details of both
disputed tax appeal and penalty appeal. However, he would be required to pay relevant percentage of disputed tax only. Further, it would not be possible for the appellant to apply for settlement of penalty appeal only when the appeal on disputed tax related to such penalty is still pending.

Question No. 9. Is there any necessity that to qualify under the Vivad se Vishwas, the appellant should have tax demand in arrears as on the date of filing declaration?

Answer: Vivad se Vishwas can be availed by the appellant irrespective of whether the tax arrears have been paid either partly or fully or are outstanding.

CBDT FAQ Vivad se Vishwas Scheme Question No. 10. Whether 234E and 234F appeals are covered?

Answer: If appeal has been filed against imposition of fees under sections 234E or 234F of the Act, the appellant would be eligible to file declaration for disputed fee and amount payable under Vivad se Vishwas shall be 25% or 30% of the disputed fee, as the case may be.
If the fee imposed under section 234E or 234F pertains to a year in which there is disputed tax, the settlement of disputed tax will not settle the disputed fee. If assessee wants to settle disputed fee, he will need to
settle it separately by paying 25% or 30% of the disputed fee, as the case may be.

Question No. 11. In case where disputed tax contains qualilying tax arrears as also non-qualifying tax arrears (such as, tax arrears relating 10 assessment made in respect of undisclosedforeign income):
(i) Whether assessee is eligible to the Vivad se Vishwas itself?
(ii) If eligible, whether quantification of disputed tax can exclude/ignore non-qualifYing tax arrears?

Answer: If the tax arrears include tax on issues that are excluded from the Vivad se Vishwas, such cases are not eligible to file declaration under Vivad se Vishwas. There is no provision under Vivad se Vishwas to settle part of
a pending dispute in relation to an appeal or writ or SLP for an assessment year. For one pending appeal, all the issues are required to be settled and if anyone of the issues makes the declaration invalid, no
declaration can be filed.

Question No. 12. If a writ has been .filed against a notice issued under section 148 of the Act and no assessment order has been passed consequent to that section 148 notice, will such case be eligible to .file declaration under
Vivad se Vishwas?

Answer: The assessee would not be eligible for Vivad se Vishwas as there is no detennination of income against the said notice.

CBDT FAQ Vivad se Vishwas Scheme Question No. 13. With respect to interest under section 234A, 234B or 234C, there is no appeal but the assessee has filed waiver application before the competent authority which is pending as on 31 Jan 2020? Will such
cases be covered under Vivad se Vishwas?

Answer: No, such cases are not covered. Waiver applications are not appeal within the meaning of Vivad se Vishwas.

Question No. 14. Whether assessee can avail of the Vivad se Vishwas for some of the issues and not accept other issues?

Answer: Refer to answer to question no 11. Picking and choosing issues for settlement of an appeal is not allowed. With respect to one order, the appellant must chose to settle all issues and then only he would be eligible to file declaration.

CBDT FAQ Vivad se Vishwas Scheme Question No. 15. Will delay in deposit of TDSITCS be also covered under Vivad se Vishwas?

Answer: The disputed tax includes tax related to tax deducted at source (TDS) and tax collection at source (TCS) which are disputed and pending in appeal. However, if there is no dispute related to TDS or TCS and there
is delay in depositing such TDS/TCS, then the dispute pending in appeal related to interest levied due to such delay will be covered under Vivad se Vishwas.

Question No. 16. Are cases pending before DRP covered? What if the assessee has not filed objections with DRP and the AO has not yet passed the final order?

Answer: Yes, a person who has filed his objections before the DRP under section 144C of the Act and the DRP has not issued any direction on or before the specified date as well as a person in whose case the DRP has issued
directions but the AO has not passed the final assessment order on or before the specified date, is eligible under Vivad se Vishwas.

It is further clarified that there could be a situation where the AO has passed a draft assessment order before the specified date. Assessee decides not to file objection with the DRP and is waiting for final order to be passed by the AO against which he can file appeal with Commissioner(Appeals). In this situation even if the final assessment
order is not passed on or before the specified date, the assessee would be considered as the appellant and would be eligible to settle his dispute under Vivad se Vishwas. Disputed tax in such case would be computed
based on the draft order. In the declaration form, the appellant in this situation should indicate that time to file objection with DRP has not expired.

Question No. 17. If CIT(Appeals) has given an enhancement notice, can the appellant avail the Vivad se Vishwas after including proposed enhanced income in the total assessed income?

Answer: The amendment proposed in the Vivad se Vishwas allows the declaration even in cases where CIT (Appeals) has issued enhancement notice on or before 31 ,t January, 2020. However, the disputed tax in
such cases shall be increased by the amount of tax pertaining to issues for which notice of enhancement has been issued.

Question No. 18. Are disputes relating to wealth tax, security transaction tax, commodity transaction tax and equalisation levy covered?

Answer: No. Only disputes relating to income-tax are covered.

CBDT FAQ Vivad se Vishwas Scheme Question No. 19. The assessment order under section 143(3) of the Act was passed in the case of an assessee for the assessment year 2015-16. The said assessment order is pending with ITAT. Subsequently another order under section 147/143(3) was passed for the same assessment year and that is pending with CIT (Appeals)? Could both or one of the orders be settled under Vivad se Vishwas?

Answer: The appellant in this case has an option to settle either of the two appeals or both appeals for the same assessment year. If he decides to settle both appeals then he has to file only one declaration form. The disputed tax in this case would be the aggregate amount of disputed tax in both appeals.

CBDT FAQ Vivad se Vishwas Scheme Question No. 20. In a case there is no disputed tax. However, there is appeal for disputed penalty which has been disposed off by CIT (Appeals) on 5th January 2020. Time to file appeal in ITAT against the order of Commissioner(Appeals) is still available but the appeal has not yet been filed. Will such case be eligible to avail the benefit?

Answer: Yes, the appellant in this case would also be eligible to avail the benefit of Vivad se Vishwas. In this case, the tenns of availing Vivad se Vishwas in case of disputed penaltylinterest/fee are similar to tenns in case of disputed tax. Thus, if the time to file appeal has not expired as on specified date, the appellant is eligible to avail benefit of Vivad se Vishwas. In this case the appellant should indicate in the declaration fonn that time limit to file appeal in ITA T has not expired.

Question No. 21. In a case ITAT has quashed the assessment order based on lack Of jurisdiction by the AO. The department has filed an appeal in HC which is pending. Is the assessee eligible to settle this dispute under
Vivad se Vishwas and if yes how disputed tax be calculated as there is no assessment order?

Answer: The assessee in this case is eligible to settle the department appeal in HC. The amount payable shall be calculated at half rate of 100%,110%, 125% or 135%, as the case may be, on the disputed tax that would be restored if the department was to win the appeal in HC.

Question No. 22. In the case of an assessee prosecution has been instituted and is pending in court. Is assessee eligible for the Vivad se Vishwas?

Answer: No. However, where only notice for initiation of prosecution has been issued with reference to tax arrears, the taxpayer has a choice to compound the offence and opt for Vivad se Vishwas.

Question No. 23. If the due date of filing appeal is after 31.1.2020 the appeal has not been filed, will such case be eligible for Vivad se Vishwas?

Answer: Yes

Question No. 24.  If appeal is .filed before High Court and is pending for admission as on 31.1.2020, whether the case is eligible for Vivad se Vishwas?

Answer: Yes

“QUESTIONS RELATED TO CALCULATION (Q. No. 25-40)”

Question No. 25. In a case appeal or arbitration is pending on the specified date, but a rectification is also pending with the A 0 which if accepted will reduce the total assessed income. Will the calculation of disputed tax be
calculated on rect!fied total assessed income?

Answer: The rectification order passed by the AO may have an impact on detennination of disputed tax, if there is reduction or increase in the income and tax liability of the assessee as a result of rectification. The disputed tax in such cases would be calculated after giving effect to the rectification order passed, if any.

CBDT FAQ Vivad se Vishwas Scheme Question No. 26. Refer to question number 5. How will disputed tux be calculated in a case where disputed demand including interest has been paid by the assessee while being in appeal?

Answer: Please refer to answer to question no. 5. To illustrate, consider a nonsearch case where an assessee is In appeal before Commissioner(Appeals). The tax on returned income (including surcharge and cess) comes to Rs. 30,000 and interest under section 234B of Rs.1,OOO. Assessee has paid this amount of Rs. 31,000 at the time of filing his tax return. During assessment an addition is made and additional demand of Rs. 16,000 has been raised, which comprises of disputed tax (including surcharge and cess) of Rs. 10,000 and interest on such disputed tax of Rs.6000. Penalty has been initiated separately. Assessee has paid the demand of Rs. 14,000 during pendency of appeal;
however interest under section 220 of the Act is yet to be calculated. Assessee files a declaration, which is accepted and certificate is issued by the designated authority (DA). The disputed tax of Rs 10,000 (at 100%) is to be paid on or before 31″ March 2020. Since he has already paid Rs. 14,000, he would be entitled to refund of Rs. 4,000 (without
section 244A interest). Further, the interest leviable under section 220 and penalty leviable shall also be waived.

CBDT FAQ Vivad se Vishwas Scheme Question No. 27. Refer to question no 7. How will disputed tax be computed in a case where assessment has been set aside for giving proper opportunity to an assessee on the additions carried out by the AO?

Answer: Please refer to answer to question no. 7. To illustrate, return of income was filed by the asseSSee. The tax on returned income was Rs 10,000 and interest was Rs 1,000. The amount of Rs 11,000 was paid before filing the return. The AO made two additions of Rs 20,000/- and Rs 30,000/-. The tax (including surcharge and cess) on this comes to Rs 6,240/- and Rs 9,3601- and interest comes toRs.2,500 and Rs.3,500 respectively. Commissioner(Appeals) has confirmed the two additions. ITAT confirmed the first addition (Rs 20,000/-) and set aside the second addition (Rs 30,000/-) to the file of AO for verification with a specific direction. Assessee appeals against the order of IT AT with respect to first addition (or has not filed appeal as time limit to file appeal against the order has not expired). The assessee can avail the Vivad se Vishwas if declaration covers both the additions. In this case the disputed tax would be the sum of disputed tax on both the additions i.e. Rs. 6240/- plus Rs. 9,360/-.

In such cases while filling the declaration fonn, appellant can indicate that with respect to the set-aside issues the appeal is pending with the Commissioner(Appeals) .

Question No. 28. What amount of tax is required to be paid, if an assessee wants to avail the benefit of the Vivad se Vishwas?

Answer: Under the Vivad se Vishwas, declarant is required to make following payment for settling disputes:

A. In appeals / writ / SLP / DRP objections / revision application under section 264 / arbitration filed by the assessee –
(a) In case payment is made till 31″ March, 2020-
(i) 100% of the disputed tax (125% in search cases) where dispute relates to disputed tax (excess amount over 100%
limited to the amount of interest and penalty levied or
leviable), or
(ii) 25% of the disputed penalty, interest or fee where dispute relates to disputed penalty, interest or fee only.
(b) In case payment is made after 31 st March, 2020 –
(i) 110% of the disputed tax (135% in search cases) where dispute relates to disputed tax (excess amount over 100%
limited to the amount of interest and penalty), or
(ii) 30% of the disputed penalty, interest or fee in case of dispute related to disputed penalty, interest or fee only. However, if in an appeal before Commissioner(Appeals) or in objections pending before DRP, there is an issue on which the appellant has got favourable decision from ITAT (not reversed by HC or SC) or from the High Court (not reversed by SC) in earlier years then the amount payable shall be half or 50% of above amount. Similarly, if in an appeal before IT AT, there is an issue on which the appellant has got favourable decision from the High Court (not reversed by SC) in earlier years then the amount payable shall be half or 50% of above amount.

B. In appeals Iwrit 1 SLP filed by the Department –
(a) In case payment is made till 31 “March, 2020-
(i) 50% of the disputed tax (62.5% in search cases) in case of dispute related to disputed tax or
(ii) 12.5% of the disputed penalty, interest or fee in case of dispute related to disputed penalty, interest or fee only.
(b) In case payment is made after 31″‘ March, 2020 –
(i) 55% of the disputed tax (67.5% in search cases) in cases of dispute related to disputed tax, or
(ii) 15% of the disputed penalty, interest or fee in case of dispute related to disputed penalty, interest or fee only.

CBDT FAQ Vivad se Vishwas Scheme Question No. 29. Whether credit for earlier taxes paid against disputed tax will be available against the payment to be made under Vivad se Vishwas?

Answer: The amount payable by the declarant under Vivad se Vishwas shall be detennined by the DA under clause 5. Credit for taxes paid against the disputed tax before filing declaration shall be available to the declarant. Please refer to example at question no. 26 above. If in that example against disputed tax of Rs. 10,000 an amount ofRs. 8,000/- has already been paid, the appellant would be required to pay only the remaining Rs. 2,0001- by 31″‘ March 2020.

Question No. 30. Where assessee settles TDS appeal or withdraws arbitration (against order U/S 201) as deductor of TDS, will credit of such tax be allowed to deductee?

Answer: In such cases, the deductee shall be allowed to claim credit of taxes in respect of which the deductor has availed of dispute resolution under Vivad se Vishwas. However, the credit will be allowed as on the date of settlement of dispute by the deductor and hence the interest as applicable to deductee shall apply.

Question No. 31. Where assessee settles TDS liability as deductor of TDS under Vivad se Vishwas (i.e against order u/s 201), when will he get consequential relief of expenditure allowance under proviso to section 40(a)(i)/(ia)?

Answer: In such cases, the deductor shall be entitled to get consequential relief of allowable expenditure under proviso to section 40(a)(i)/(ia) in the year in which the tax was required to be deducted. To illustrate, let us assume that there are two appeals pending; one against the order under section 201 of the Act for non-deduction of TDS and another one against the order under section 143 (3) of the Act for disallowance under section 40(a)(i)/(ia) of the Act. The disallowance under section 40 is with respect to same issue on which order under section 20 I has been issued. If the dispute is settled with respect to order under section 20 I, assessee will not be required to pay any tax on the issue relating to disallowance under section 40(a)(i)/(ia) of the Act, in accordance with the provision of section 40(a)(i)/(ia) of the Act.

In case, in the order under section 143(3) there are other issues as well, and the appellant wants to settle the dispute with respect to order under section 143(3) as well, then the disallowance under section 40(a)(i)/(ia) of the Act relating to the issue on which he has already settled liability under section 201 would be ignored for calculating disputed tax.

If the assessee has challenged the order under section 20 I on merits and has won in the Supreme Court or the order of any appellate authority below Supreme Court on this issue in favour of the assessee has not been challenged by the Department on merit (not because appeal was not filed on account of monetary limit for filing of appeal as per
applicable CEDT circular), then in a case where disallowance under section 40(a)(i)/(ia) of the Act is in consequence of such order under section 20 I and is part of disputed income as per order under section
143(3) in his case, such disallowance would be ignored for calculating disputed tax, in accordance with the proviso to section 40(a)(i)/(ia) of the Act.

It is clarified that if the assessee has made payment against the addition representing section 40(a)(i)/(ia) disallowance, the assessee shall not be entitled to interest under section 244A of the Act on amount refundable,
if any, under Vivad se Vis/lWas,

It is further clarified that if the assessee wish to settle disallowance under section 40(a)(i)/(ia) in a search case on the basis of settlement of the dispute under section 201, he shall be required to pay higher amount as applicable for search cases for settling dispute in respect of that TDS default under section 201.

CBDT FAQ Vivad se Vishwas Scheme Question No. 32. When assessee settles his own appeal or arbitration under Vivad se Vishwas, will consequential relief be available to the deductor in default from liability determined under TDS order U/S 201?

Answer: When an assessee (being a person receiving an income) settles his own appeal or arbitration under Vivad se Vishwas and such appeal or arbitration is with reference to assessment of an income which was not subjected to TDS by the payer of such income (deductor in default) and an order under section 201 of the Act has been passed against such deductor in default, then such deductor in default would not be required to pay the corresponding TDS amount. However, he would be required to pay the interest under sub-section (IA) of section 201 of the Act. If such levy of interest under sub-section (IA) of section 201 qualifies for Vivad se Vishwas, the deductor in default can settle this dispute at 25% or 30% of the disputed interest, as the case may be, by filing up the relevant schedule of disputed interest.

Question No. 33. Where DRP order passed on or after 1st July, 2012 and before lsi June, 2016 have given relief to assessee and Deparlment has filed appeal, how assessed tax to be calculated?

If department appeal is required to be settled, then against that appeal the appellant is required to pay only 50% of the amount that is otherwise payable if it was his appeal.

Question No. 34. Appeals against assessment order and against penalty order are filed separately on same issue. Hence there are separate appeals for both. In such a case how dis puled tax to be calculated?

Answer: Please see question no. 8. Further, it is clarified that if the appellant has both appeal against assessment order and appeal against penalty relating to same assessment pending for the same assessment year, and he wishes to settle tbe appeal against assessment order (with penalty appeal automatically covered), he is required to give details of both appeals in one declaration fom1 for that year. However, in the annexure he is required to fill only the schedule relating to disputed tax.

Question No. 35. If there is substantive addition as well as protective addition in the case of same assessee for different assessment year, how will that be covered? Similarly if there is substantive addition in case of one assessee and protective addition on same issue in the case of another assessee, how will that be covered under Vivad se Vishwas?

Answer: If the substantive addition is eligible to be covered under Vivad se Vishwas, then on settlement of dispute related to substantive addition AO shall pass rectification order deleting the protective addition relating to the same issue in the case of the assessee or in the case of another assessee.

CBDT FAQ Vivad se Vishwas Scheme Question No. 36. In a case ITAT has passed order giving relief on two issaes and confirming three issues. Time to file appeal has not expired as on specified date. The taxpayer wishes to file declaration for the three issues which have gone against him. What about the other two issues as the taxpayer is not sure if the department willfile appeal or not?

Answer: The Vivad se Vishwas allow declaration to be filed even when time to file appeal has not expired considering them to be a deemed appeal. Vivad se Vishwas also envisages option to assessee to file declaration for only his appeal or declaration for department appeal or declaration for both. Thus, in a given situation the appellant has a choice, he can only settle his deemed appeal on three issues, or he can settle department deemed appeal on two issues or he can settle both. If he decides to settle only his deemed appeal, then department would be free to file appeal on the two issues (where the assessee has got relief) as per the extant procedure laid down and directions issued by the CBDT.

Question No. 37. There is no provision for 50% concession in appeal pending in HC on an issue where the assessee has got relief on that issue from the SC?

Answer: If the appellant has got decision in his favour from SC on an issue, there is no dispute now with regard to that issue and he need not settle that issue. If that issue is part of the multiple issues, the disputed tax may be calculated on other issues considering nil tax on this issue.

CBDT FAQ Vivad se Vishwas Scheme Question No. 38. Addition was made uls 143(3) on two issues whereas appeal.filed only for one addition. Whether interest and penalty be waived for both additions.

Answer: Under Vivad se Vishwas, interest and penalty will be waived only in respect of the issue which is disputed in appeal and for which declaration is filed. Hence, for the undisputed issue, the tax, interest and penalty shall be payable,

Question No. 39. DRP has issued directions confirming all the proposed additions in the draft order and the A 0 has passed the order accordingly. The issues confirmed by DRP include an issue on which the taxpayer has
got favourable order from ITAT (not reversed by HC or SC) in an earlier year. The time limit to,file appeal in ITAT is still available. The taxpayer is eligible for Vivad se Vishwas treating the situation as taxpayer’s deemed appeal in ITAT. In this case how will disputed tax be calculated? Will it be 100% on the issue allowed by ITAT in earlier
years or 50%?

Answer: In this case, on the issue where the taxpayer has got relief from ITAT in an earlier year (not reversed by He or SC) the disputed tax shall be computed at half of normal rate of 100%, 110%, 125% or 135%, as the case maybe.

CBDT FAQ Vivad se Vishwas Scheme Question No. 40. Where there are two appeals filed for an assessment year– one by the appellant and one by the tax department, whether the appellant can opt for only one appeal? If yes, how would the disputed tax be computed?

Answer: The appellant has an option to opt to settle appeal filed by it or appeal filed by the department or both. Declaration fonn is to be filed assessment year wise i.e. only one declaration for one assessment year. For different assessment years separate declarations have to be filed. So the appellant needs to specify in the declaration fonn whether he wants to settle his appeal, or department’s appeal in his case or both for a particular assessment year. The computation of tax payable would be carried out accordingly.

“QUESTIONS RELATED TO PROCEDURE (Q. No. 41-50)”

Question No. 41. How much time shall be available for paying the taxes after filing a declaration under the Vivad se Vishwas?

Answer: As per clause 5 of Vivad se Vishwas, the DA shall determine the amount payable by the declarant within fifteen days from the date of receipt of the declaration and grant a certificate to the declarant containing particulars of the tax-arrear and the amount payable after such detennination. The declarant shall pay the amount so detennined within fifteen days of the date of receipt of the certificate and intimate the details of such payment to the DA in the prescribed form. Thereafter, the DA shall pass an order stating that the declarant has paid the amount. It may be clarified that 15 days is outer limit. The DAs shall be instructed to grant a certificate at an early date enabling
the appellant to pay the amount on or before 31 st March, 2020 so that he can take benefit of reduced payment to settle the dispute.

Question No. 42. If taxes are paid after availing the benefits of the Vivad se Vishwas and later the taxpayer decides to take refund of these taxes paid, would it be possible?

Answer: No. Any amount paid in pursuance of a declaration made under the Vivad se Vishwas sball not be refundable under any circumstances.

CBDT FAQ Vivad se Vishwas Scheme Question No. 43. Where appeals are withdrawn from the appellate forum, and the declarant is declared to be ineligible under the Vivad se Vishwas by DA at the stage of determination of amount payable under section 5(1) or, amount determined by DA is at variance of amount declared by declarant and declarant is not agreeable to DA’s determination of amount payable, then whether the appeals are automatically reinstated or a separate application needs to be filed for reinstating the appeal before the appellate authorities

Answer: Under the amended procedure no appeal is required to be withdrawn before the grant of certificate by DA. After the grant of certificate by
DA under clause 5, the appellant is required to withdraw appeal or writ or special leave petition pending before the appellant forum and submit proof of withdrawal with intimation of payment to the DA as per the same clause. Where assessee has made request for withdrawal and such request is under process, proof of request made shall be
enclosed.
Similarly in case of arbitration, conciliation or mediation, proof of withdrawal of arbitration/conciliation/mediation is to be enclosed along with intimation of payment to the DA.

CBDT FAQ Vivad se Vishwas Scheme Question No. 44. Clause 5(2) requires declarant to pay amount determined by DA within 15 days of receipt of cenificate from DA. Clarification is required on whether declarant is to also intimate DA about fact of having made payment pursuant to declaration within the period of 15 days?

Answer: As per clause 5(2), the declarant shall pay the amount detemlined under clause 5(1) within fifteen days of the date of receipt of the certificate and intimate the details of such payment to the DA in the prescribed form and thereupon the DA shall pass an order stating that the declarant has paid the amount.

Question No. 45. Will DA also pass order granting expressly, immunity from levy of interest and penalty by the A () as well as immunity from prosecution?

Answer: As per clause 6, subject to the provisions of clause 5, the DA shall not institute any proceeding in respect of an offence; or impose or levy any penalty; or charge any interest under the Income-tax Act in respect of tax arrears. This shall be reiterated in the order under section 5(2) passed by DA.

Question No. 46. Whether DA can amend his order to rectify any patent errors?

Answer: Yes, the DA shall be able to amend his order under clause 5 to rectify any apparent errors.

Question No. 47. Where tax determined by DA is not acceptable can appeal be filed against the order of designated authority before ITAT, High Court or Supreme Court?

Answer: No. As per clause 4(7), no appellate forum or arbitrator, conciliator or mediator shall proceed to decide any issue relating to the tax arrears mentioned in the declaration in respect of which order is passed by the DA or the payment of sum determined by the DA.

Question No. 48. There is no provision for withdrawal of appeal/writ/SLP by the department on settlement of dispute

Answer: On intimation of payment to the DA by the appellant pertaining to department appeal/writ/SLP, the department shall withdraw such appeal/writ/SLP.

Question No. 49. Once declaration is filed under Vivad se Vishwas, and for financial difficulties, payment is not made accordingly, will the declaration be null and void?

Answer: Yes it would be void.

Question No. 50. Where the demand in case of an assessee has been reduced partly or fully by giving appeal effect to the order of appellate forum, how would the umount payable under Vivad se Vishwas be adjusted?

Answer: In such cases, after getting the proof of payment of the amount payable under Vivad se Vishwas, tbe AO shall pass order under the relevant provisions of Vivad se Vish was to create demand in case of assessee against which the amOlUlt payable shall be adjusted.

“QUESTIONS RELATED TO CONSEQUENCES (Q. No. 51-55)”

Question No. 51. Will/here be immunity from prosecution?

Answer: Yes, clause 6 provides for immunity from prosecution to a declarant in relation to a tax arrears for which declaration is filed under Vivad se Vishwas and in whose case an order is passed by the DA that the amount payable under Vivad se Vishwas has been paid by the declarant.

Question No. 52. Will the result of this Vivad se Vishwas be applied to same issues pending before AO?

Answer: No, only the issues covered in the declaration are settled in the dispute without any prejudice to same issues pending in other cases. It has been clarified that malcing a declaration under this Act shall not amount to conceding the tax position and it shall not be lawful for the income-tax authority or the declarant being a part in appeal or writ or in SLP to contend that the declarant or the income-tax authority, as the case may be, has acquiesced in the decision on the disputed issue by settling the dispute.

Question No. 53. If loss is not allowed to be adjusted while calculating disputed tax, will that loss be allowed to be carriedforward?

Answer: As per the amendment proposed in Vivad se Vishwas, in a case where the dispute in relation to an assessment year relates to reduction of Minimum Alternate Tax (MAT) credit or reduction of loss or depreciation, the appellant shall have an option either to (i) include the amount of tax related to such MAT credit or loss or depreciation in the amount of disputed tax and carry forward the MAT credit or loss or deprecation or (ii) to carry forward the reduced tax credit or loss or depreciation. CBDT will prescribe the manner of calculation in such cases.

CBDT FAQ Vivad se Vishwas Scheme Question No. 54. If the taxpayer avails Vivad se Vishwas for Transfer Pricing adjustment, will provisions of section 92CE of the Act apply separately?

Answer: Yes, secondary adjustment under section 92CE will be applicable. However, it may bc noted that the provision of secondary adjustment as contained in section 92CE of the Act is not applicable for primary adjustment made in respect of an assessment year commencing on or before the l”t day of April 2016. That means, if there is any primary adjustment for assessment year 2016-17 or earlier assessment year, it is not subjected to secondary adjustment under section 92CE of the Act.

Question No. 55. The appellant has settled the dispute under Vivad se Vishwas in an assessment year. Whether it is open for Revenue to take a stand that the additions have been accepted by the appellant and hence he cannot dispute it in future assessment years?

Answer: Please refer answer to question no 52. It has been clarified in Explanation to clause 5 that making a declaration under Vivad se Vishwas shall not amount to conceding the tax position and it shall not be lawful for the income-tax authority or the declarant being a part in appeal or writ or in SLP to contend that the declarant or the incometax authority, as the case may be, has acquiesced in the decision on the disputed issue by settling the dispute.

The UAE introduced  Resolution on Economic Substance (Cabinet of Ministers Resolution No.31 of 2019, the “Regulations” or “UAE Economic Substance Law” ) on 30 April 2019, which was supplemented by further guidance issued on 11 September 2019. To provide further clarity on the various terms used in the Regulations, the UAE has issued 41 FAQs in January 2020.

While the additional FAQ’s mainly clarify the provision of the ESR Regulations issued earlier, some of the noteworthy points included in the FAQ’s are as under : –

A. Applicability of UAE Economic Substance Regulations and its scope

What is the Period covered by the UAE ESR Regulations : – 

• • The Regulations apply to financial years commencing on or from 1 January 2019.

What are the compliance for companies covered by ESR Regulations ?

• • Entities that are governed by the Regulations will need to submit : –
    • Notification to their Regulatory Authority (defined under Cabinet Decision No(58) of 2019 issued on 4 September 2019) from 1 January 2020 onwards; and
    • Economic substance declaration within 12 months from the end of their financial year to the same Regulatory Authority (e.g. 31 December 2020 for entities with a financial year ending 31 December 2019).

Do the regulations apply to us even if we have not earned income from relevant activity in a financial period ?

• • A Licensee that undertakes a Relevant Activity but does not earn income from this activity in a financial period would need to submit a notification with its Regulatory Authority, but it is not required to file an Economic Substance Return for the relevant financial period.

My ownership is completely local. Am I still covered by the Regulations ?

• • Regulations apply to both UAE entities that are part of a foreign multinational group, or any UAE entity which carries on a Relevant Activity even though it is not a part of a foreign multinational group. However, UAE based Distribution Business, Service Centre Business, Headquarter Business or High-Risk IP Business would only be within the scope of the Regulations if the UAE entity transacts with foreign group companies.

For ESR, is my local income excluded ?

• • The Licensee needs to demonstrate economic substance in the UAE for domestic income as well as income earned from outside of the UAE.

An activity is not stated on my commercial license but is actually undertaken by us. Are we covered ?

• • It has been clarified that a ‘substance over form’ approach must be used to determine whether a Licensee undertakes a Relevant Activity or not. This would mean looking beyond what is stated on the commercial license to the activities actually undertaken by the Licensee during a financial period.

B. UAE Economic Substance Regulations – First reportable Financial Year

Since the Regulations apply to financial years starting on or after 1 January 2019, if the financial year starts after 1 January 2020, there is no need to comply with the Regulations for the period 1 January 2019 date immediately preceding the beginning of the FY.

Example: For a UAE company with 1 April 2019 – 31 March 2020 financial year, first assessable period would be 1 April 2019-31 March 2020 and the UAE company need not comply with the Regulations for the period 1 January 2019 – 31 March 2019.

3.      Demonstrating Economic Substance  in the UAE

• • Given that businesses vary in size and nature, what is adequate and appropriate to meet Economic substance will depend on the nature and level of activities carried out, and the level of income earned by the Licensee. Regulatory Authorities would be expected to take a pragmatic approach to determine if a Licensee has met the Economic Substance Test, considering the type and level of activity of a Licensee.
  • Determination of economic substance shall be assessed on a Licensee by Licensee basis, and not on a consolidated group basis. However, relevant economic substance (staff, functions, assets etc.) maintained in the UAE by other group companies can be taken into account if that economic substance is made available to the Licensee under a service / outsourcing type arrangement
  •  Adequate number of board meetings should be held in the UAE, depending on the nature and extent of the Relevant Activity being undertaken by the Licensee.
  •  It has been clarified that having a UAE tax residency certificate in itself is not a proof of meeting the Economic Substance Test.
  •  Employees who perform CIGAs of a Licensee would in principle need to be resident in the UAE, but non- resident can be considered if relevant activities are performed while they are physically present in the UAE and certain other conditions are satisfied
  • Directors need to be physically present in the UAE to attend relevant board meetings of the Licensee and can be counted asemployees if they also perform CIGAs.
  • UAE Tax Residency Certificate in itself is not proof of a Licensee having adequate economic substance in the UAE in relation to is Relevant Activity and the income earned from this activity.
  • A Licensee cannot outsource the activities of being “directed and managed”, as the Licensee is required to demonstrate oversight and control of its Relevant Activity in the
  • Outsourcing can be done  related parties or to third party service providers. Further, activities that are not CIGAs (e.g.backoffice functions) canbe outsourced to service providers outside the UAE

4. Administration of UAE Economic Substance Regulations

• A Licensees undertaking a Relevant Activity needs to submit a simple notification with its Regulatory Authority , even if they qualify for an exemption under the Regulations or have not earned income from the Relevant Activity during the relevant financial period
• Licensees that earn income from a Relevant Activity during the relevant financial period and are not exempt from the Regulations are required to demonstrate economic substance in the UAE and file an economic substance return within 12 months from the end of the relevant financial period.

5. Sample activities that Licensee can consider undertaking before the end of a financial period

The UAE Economic Substance Law provide that the following is a non-exhaustive list of matters, which a Licensee should consider undertaking before the end of a financial period:

• Assess what (if any) Relevant Activities have been performed during the financial period (applying a “substance over form” approach);
• Assess the amount and type of income earned (if any) from the Relevant Activity during the financial period;
• Hold board meetings with a quorum of directors physically present in the UAE;
• Ensure board meeting minutes are signed and maintained in the UAE;
• Identify the amount and type of expenses and UAE based assets (incl.premises) in respect of the Relevant Activity, and ensure access to assets (incl. premises) can be demonstrated (through agreements and financial records)
• Identify the number of UAE based full-time employees or other personnel (and their qualifications) responsible for carrying on the Licensee’s Relevant Activity; and
• Ensure control and supervision over any outsourcing arrangements can be demonstrated, e.g. through contractual agreements.

The Notification also provides certain additional clarifications in respect of each of the Relevant activities. The copy of the Notification can be accessed at https://www.mof.gov.ae/en/StrategicPartnerships/Pages/ESR.aspx.

For any queries, write to us at arinjayjain@arinjayacademy.com

Purpose of Form 15CB

Form 15CB is the Form, in which a Chartered Accountant, is required to certify  the tax that should be deducted from specified  payments to the non-resident   , which is the subject matter of such certificate (Section 195(6)). Such Form 15CB has to be obtained , before paying any sum to non-resident ,  whether or not the payment is chargeable to tax , and has to be filed online.

Relevant Factors to be considered in making decision on , which Part of Form 15CB needs to be filed are as under : –

• Whether remittance is chargeable to tax or is not chargeable to tax under Income Tax Act , 1961 ?
• Whether remittance is less than or more than Rs 5 lakhs ?
• Whether certificate of AO is obtained for nil or lower deduction of TDS ?
• Whether payments covered under Specified list ?

Once these items are identified, the Payor would be required to furnish Form 15CA/Form 15CB as per the following table   : –

Payments to non-resident for which no form 15CA / Form 15CB to be filed

However, Form 15cb is not required to be obtained in the case of the following specified transactions : –

When to file form 15CB ?

1)When payment is chargeable to tax

• Form 15CB should be filed when payment to non-resident is chargeable to tax under the Income Tax Act.

          EXAMPLE:-  No Form 15CB shall be filed for income exempt u/s 10

• Form 15CB should also be filed when payment to non-resident is chargeable to tax under the Income-Tax Act but it is exempt from tax under DTAA

EXAMPLE:- Form 15CB shall be filed for capital gains which are taxable under the Income Tax Act but exempt from tax under India Singapore DTAA.

2)When aggregate payment is more than Rs 5 lakhs

• Form 15CB shall be filed when single payment does not exceed Rs 5 lakhs but aggregate payment during the FY would exceed Rs 5 lakhs

        EXAMPLE :-

ECB interest of Rs 4 lakhs to be paid per quarter during FY 2017-18 . In this case Form 15CB shall be filed as amount of Rs 16 lakhs would be paid in the entire  FY 2017-18

• No Form 15CB shall be filed when payment to non-resident does not exceed Rs 5 lakhs and no further payment would be paid to such non-resident during such FY.

Step by Step Procedure to fill form 15CB ?

How to File Form 15CA -CB

BASIC DETAILS –  FORM 15CB

The Chartered Accountant needs to enter the name of payor and non-resident payee along with PAN / TAN of payor  in Form 15CB .

NAME AND ADDRESS OF BENEFICIARY-Form 15CB

The Chartered Accountant need to enter the name and address of non-resident beneficiary .

REMITTANCE DETAILS –  FORM 15CB

1.Country to which remittance is made :- In this column, Foreign Country to which remittance is made should be entered.

Currency :-  In this column type of foreign currency should be reported in which payment is to be made  (like US dollar, Pounds, etc.)

2. Amount payable :- In this column amount payable to non-resident as per invoice should be reported . The amount payable in foreign currency would be readily available from the invoice or agreement .

3. Bank details  :- Details of banks should be reported from which payment is to be made to the non-resident

5. Proposed date of remittance :- Proposed date of remittance would be available from the bank advice sent by deductor to its bank for payment to non-resident .

6. Nature of remittance as per agreement :-  In this column nature of remittance should be selected , i.e., whether remittance is made for royalty , short-term capital gains , professional services, etc. Nature of remittance as per service agreement or contract should be reported .

7. Relevant purpose code as per RBI :- After selecting the nature of service,  list of RBI code relating to such service would appear in order to pin point and report relevant service .

Grossing-up  :- Where withholding tax is borne by the deductor then ‘Yes’ option should be selected in this column .

8. Tax liability without considering DTAA :-  In this column, the tax liability will be computed without considering the impact of relevant DTAA .

• Remittance chargeable to tax India :- Where remittance is chargeable to Income Tax then the option of “Yes” should be selected from the drop down list . Where remittance is not chargeable to tax then there is no need to file Form 15CB and in such case Part D of Form 15CA should only be filed .
• Relevant section under which remittance is covered :- In this column we need to mention the relevant section under which such remittance is taxable or under which tax rate is prescribed. In case of Royalty / Fees for Technical Services Section 9(1)(vi)/ (vii) read with Section 115A should be mentioned
• Amount of income chargeable to tax :- In this column amount payable in INR which is reported in S. No 2 in INR should be mentioned in case of income taxable on gross basis (like, Interest , Royalty, Fee for Technical Services) . Otherwise net income should be computed after deducting expenditure and that net income should be mentioned in this column .
• Tax liability :- In order to compute tax liability, amount of income chargeable to tax should be multiplied with the rate of tax under Income Tax Act

9. If income is chargeable to tax in India and any relief is claimed under DTAA :-  In this column the tax liability will be computed on the basis of relevant DTAA .

• Whether TRC is obtained from the recipient of remittance :- Where TRC is obtained from the non-resident payee then option of Yes should be selected . Where TRC is not obtained from the recipient then the withholding tax liability would be determined as per the Income Tax Act .
• Please specify relevant DTAA :- In this column we need to mention the relevant Article of DTAA . Generally in many DTAAs Article 10, Article 11 and Article 12 are mentioned for Dividend , Interest and Royalty and Fees for Technical Services, respectively . We also need to mention the relevant paragraph of Article in this column .
• Taxable income as per DTAA :- In case income of non-resident payee is taxable as per DTAA , then such amount of income should be specified in this column. In case of income taxable on gross basis, the grossed up amount should be mentioned here. However, if such income is not taxable under DTAA then nil amount should be mentioned here .
• Tax liability as per DTAA :- Amount of taxable income should be multiplied with the applicable rate under DTAA in order to determine the tax liability .

A.      If the remittance is for royalties , fee for technical services , interest , dividend , etc. :- In this           column ‘Yes’ option should be selected where the payment to non-resident relates to royalties , Fee for technical services, interest or dividend .

• Article of DTAA :- In this column relevant article of DTAA should be mentioned, (i.e., Article 10 , Article 11 or Article 12 which is used for such income in most of the DTAAs)
• Rate of TDS required to be deducted in terms of such article of the applicable :- In this column rate of TDS given in DTAA should be mentioned .

B.   In case remittance is on account of business income , please indicate :- In this column ‘Yes’ option should be selected where the payment to non-resident relates to business income .

• Whether such income is liable to tax in India :- In this column relevant option ‘Yes’ should be selected if such income is taxable in India . Generally business income is taxable in India when non-resident payee has Permanent Establishment in India and such business income is connected with such Permanent Establishment .
• If not please furnish brief reasons thereof, specifying relevant article of DTAA :- Generally business income of non-resident is not taxable in India when NR does not have any Permanent Establishment in India or such business income is not connected with such Permanent Establishment in India . Thus, in the column, relevant paragraph of Article 7 of DTAA should be mentioned wherein requirement of Permanent Establishment is specified to tax business profits of non-resident in India .

C. In case remittance is on account of capital gains , please indicate :- In this column ‘Yes’ option should be selected where the payment to non-resident relates to capital gains .

• Amount of long-term capital gains :- In this column amount of long-term capital gains should be mentioned .
• Amount of short-term capital gains :-In this column amount of short-term capital gains should be mentioned .
• Basis of arriving taxable income :- In this column, relevant Article of DTAA should be mentioned as per which taxability of capital gains is determined .

D. In case of other remittance not covered by sub-items A, B and C of Form 15CB :- In this column ‘Yes’ option should be selected where the payment to non-resident relates to other income. Other income would be selected where such income is not covered as dividend, interest, royalty, Fee for Technical services, capital gains .

• Please specify nature of remittance :- In this column nature of remittance of other income should be specified
• Whether taxable in India as per DTAA :- In this column ‘Yes’ option should be selected where other income is taxable in India
• If yes, rate of TDS required to be deducted in terms of such article of applicable DTAA :- Generally no rate of tax is specified for other income in DTAA . Thus, in such case tax rate of 40% given in the IT Act should be specified here .
• If not, please furnish brief reasons thereof, specifying relevant article of DTAA :- In numerous DTAAs , other income is taxable in the country of residence only . Thus, in such a case relevant para of Article of DTAA should be specified here .

10. Amount of TDS :-

• In foreign currency
• In Indian Rs

11. Rate of TDS :- There is an option in the drop down list to select rate of TDS as per the Income Tax Act or rate of TDS as per DTAA.  Where the rate of TDS under the DTAA is beneficial , then the option of ‘As per DTAA’ should be selected .

12. Actual amount of remittance after TDS (in foreign currency) :- Where the withholding tax is borne by the payor,  and the income of non-resident is taxable on gross basis (i.e, in case of dividend, interest, royalty, Fee for Technical Services), the grossed up amount should be reported. Where the withholding tax is not borne by the payor, the net amount should be mentioned after deducting TDS.

13. Date of deduction of tax at source, if any :- Where TDS is already deducted on credit basis, the date of such deduction of TDS should be mentioned.