The document discusses recommendations from a report that aim to reduce tax-related litigation in India. It summarizes that clarifying some controversial tax issues currently in litigation could help reduce cases. For example, the government deciding not to challenge a court decision on share premiums ended that litigation. Overall, the recommendations seek to simplify tax laws and compliance to improve predictability for businesses and encourage more taxpayers. However, some other challenging tax issues still need clarification to further reduce disputes.

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January 24, 2016 Last Updated at 21:33 IST
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Tax­related litigation to come down:
Pranay Bhatia
The attempt to clarify some of the controversial issues is a positive step,
especially since some of these issues are today before some of the
judicial forums, and, therefore sub­judice. If recommendations in relation
to the issues outlined are clarified through the legislative process, the
ongoing litigation will certainly be put to rest. We have already seen that
the approach of the government seems to be to cut down on the pending
tax litigations and these recommendations are a step in that direction.
The decision not to litigate the taxability of share premium decision of the
Bombay High Court is an indication of the positive approach. Not only
has the litigation on this issue has come to rest, the tax officers at the
ground level are also not making any disallowance in this regard. Accordingly, these recommendations will go a
long way in positively impacting India's image as providing a predictable tax regime.
As a fair play on the ground of tax, the report has also suggested putting in place onus/accountability on the
revenue authorities to adequately record satisfaction on applicability of Section 14A, providing higher interest in
case of delayed tax refund etc. Proposal to defer the ICDS provisions is also a welcome step given its nascent
stage as well as clarity and implementation issues.
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READ MORE ON PRANAY BHATIA TAX LITIGATIONS BOMBAY HIGH COURT SECTION 14A
ICDS CRS COMMON REPORTING STANDARD CBCR OPINION COLUMNS
It would not be out of place to mention that in addition to the issues already attempted to be addressed, there are
other critical areas, which also need clarification and resolution, and which are impacting the tax payers at large.
Some of these issues include taxability of software payments, admissibility of AMP (advertisement, marketing
and sales promotion) expenses, guidelines for creation of an AOP (association of persons) and taxation thereof.
I am banking on Part II of the recommendations to be released to see if some of these issues are also part of the
overall recommendations.
The 'easy to understand and comply' tax system, rational and fair provisions, minimum pain and cost of
compliance (including time) will enhance the tax compliance culture. Some of the recommendations, especially in
relation to small entrepreneurs and foreign companies, are relevant and will encourage dealing with the tax
compliances. It is important to note that globally compliances are on the rise, whether in the form of CRS
(common reporting standard) or the proposed CBCR (country­by­country reporting). An attempt to simplify the
processes shows that the government is focused on important compliances rather than every compliance. This
is a pragmatic shift of approach encouraging transparent dealing with the tax payers.
(Views expressed are personal)
Pranay Bhatia
Partner ­ Direct Tax, BDO India
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