india tax despute resolution including INCOME TAX SETTLEMENT COMMISSION

1. Bird eye view
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2. Avenues
1.
2.
3.
4.
5.
Traditional avenues
Non traditional avenues
Dispute Resolution Penal(DRP)
Mutual Agreement Procedure(MAP)
Advanced Pricing Procedure(AAP)
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3. 1.Traditional
avenues
Hierarchy of the authorities as per the traditional
avenues:
Tax Officer
High Court
Commissioner
(Appeals)
Supreme Court
Tribunal
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4. Most tax disputes are dealt under
traditional dispute resolution avenues
Each level of hierarchy involves
substantial period of time
Biggest disadvantage —:
It could take several years to
achieve certainty in tax
position!!
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5. Traditional avenues
Challenges
•Tax uncertainty coupled with substantial period in
litigation process
•Huge number of pending cases before the various
dispute resolution forum.
•Aggressive approach in tax collections and tedious tax
refund process dents tax payers confidence
•Conflicting decisions at various levels of dispute
resolution forums adds to the complexity of the Indian
tax laws
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•Possibility of further litigation.

6. 2.Non-Traditional
Avenues
•Dispute Resolution Panel
•Mutual Agreement Procedure
•Advance Pricing Agreements
•Authority for Advance Rulings
•Settlement Commission
•SLP with Supreme court/High court
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7. by ishan & Atmiya

8. The dispute resolution process would
proceed on the following lines —
•
Before passing an adverse order, the Assessing Officer
(AO) to forward a draft of the adverse order to the
taxpayer.
• The taxpayer can file its objections (if any) with the Panel
and the AO, within 30 days of the receipt of the draft order.
• The Panel would consider the facts and circumstances of
the case and issue appropriate directions to the AO, within
a maximum period of 9 months.
• The directions issued by Panel are binding on the AO
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9. Powers and duties of
DRP
• DRP may confirm, reduce or enhance the variations as
proposed by tax Authority.
• DRP cannot set side the variation to tax authority
• DRP cannot leave adjudication of issue to tax authority by
directing the tax
• Authority to pass order of assessment by conducting
further inquiry
• Decision to be based on opinion of the majority of the
members
• No direction can be issued by DRP after nine months from
end of month in which draft order is forwarded to eligible
taxpayer
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10. Role of tax authority after
receipt of directions:
•
Every direction of DRP shall be binding on the Tax
authority
• Tax authority shall, within one month from end of month in
which directions of DRP are received, complete his order
in conformity with DRP‘s directions without providing an
opportunity of hearing to taxpayer.
• Tax authority will now raise enforceable demand by
issuing demand notice along with the order of
assessment.
• The limitation bar in Section 153 of the Act will not apply in
a case where Role of tax authority after receipt of
directions assessment is completed pursuant to
directions of DRP.
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11. Alternatives for taxpayer on
receipt of draft order
Scenario I:
Taxpayer communicates
acceptance to AO to the
proposed
variation within 30 days
AO to pass final order
raising
demand within one month
from
end of the month of
acceptance
Taxpayer may not have
right of
further appeal
DRP to confirm, reduce or
enhance variations based on
majority view within nine months
from the end of the month in
which
draft order is forwarded to the
taxpayer
Direction of DRP binding on
AO who has to pass order
within one
month from the end of month
in
which direction is received
AO to pass final order raising
demand within one month from
the
end of the month pin which the
period of filing of the objection
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expires
Can the taxpayer appeal
before
CIT(A) and pursue
traditional
avenues?
Scenario II:
Taxpayer to file objection to
DRP on variations proposed
by AO
within 30 days from the date of
receipt of draft order
Scenario III:
Taxpayer to neither
accept
variations nor object to
the
variations

12. Remedy available after order
is passed pursuant to
directions of DRP
• Taxpayer has a right to submit an appeal petition
to ITAT(INCOME TAX APPELLET TRIBUNAL)
against order of tax authority
• Tax authority has no right to appeal to ITAT. Tax
authority has no right to file cross objections to
ITAT. Tax authority however, will have right of
hearing before ITAT
• Proceedings before ITAT would be as per
conventional manner being followed by ITAT
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13. MUTUAL
AGREEMENT
PROCEDURE
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14. Mutual Agreement Procedure
• Mutual Agreement Procedure (‗MAP‘) is an alternate mechanism
incorporated into many tax treaties for the resolution of international tax
disputes
– Scope limited to issues pertaining to tax treaties and does not
extend to domestic tax laws
• Resolution of disputes through the intervention of the Competent
Authorities (‗CAs‘) of each state who evolve a mutually acceptable solution
– Possibility of dispute resolution through a negotiated settlement
• Relief through MAP possible irrespective of remedies available under
domestic tax laws
• Issues which can be tackled through MAP :—
– Disputes where taxpayer contends that he is being taxed in a
manner not in accordance with the tax treaty
– Issues relating to interpretation of terms appearing in the tax treaty
– Elimination of double taxation in cases not covered by tax treaties
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15. MAP and Indian rules
•
•
•
•
Rule 44G
Applicable to resident
assessee
Aggrieved by action of the
tax authority outside India
Such action is not in
accordance
with the agreement or tax
laws May make an
application to CA in India to
invoke MAP
•
•
•
•
Example: Indian Software
Companies affected by Taxation
in Japan and sought the help of
Indian CA to resolve the issue
•
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Rule 44H
Indian CA receives a
reference from CA outside
India
Indian CA shall call for and
examine the relevant
records
Indian CA shall endeavour
to arrive at a resolution
Resolution arrived at shall
be communicated to DGIT
or CCIT wherever
necessary
Assessee can give his acceptance
to the resolution and withdraw the
appeal under traditional avenues

16. MAP — Procedure
Admission
Solution
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Consultation
MAP request

17. MAP — Procedure
BRIEF
1. MAP request:
• Tax payer to make a MAP request to the home country CA
• Request can be made where there is double taxation or taxation inconsistent with treaty
2. Admission:
• Application admitted at CA’s discretion
• CA can call for additional information from tax payer at this stage
3.Consultation:
• Where issue cannot be resolved unilaterally by home country CA, Host country CA called upon
for dispute resolution
4. Representation:
• Tax payer may be requested to make written or oral representations
5. Negotiations:
• CAs initiate negotiation and attempt to reach an amicable resolution
• Taxpayer typically not directly involved in the process however he may be called upon to make
submissions
6. Solution:
• Proposed agreement communicated to the Taxpayer for his acceptance
• Solution to be given effect to within 90 days, if taxpayer consents
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18. MAP vis-à-vis domestic
appeal process
Criteria
MAP
Appeal
Time frame
Generally 2 to 3 years
Can range from 7 to 12
years, depending upon level
Approach
More scope for
negotiation/compromise. CAs
could agree on a ―middle path‖
Legalistic approach, no
negotiations
Double tax
Mitigation
Possibility of avoiding double tax
impact through
correlative relief
Double tax exposure if appeal is
against taxpayer;
correlative relief to be
separately pursued
Finality
Greater chance of reaching
finality, decision of CA
binding on Revenue
Revenue can prefer further
appeal if order is in
taxpayer‘s favor
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19. Advance Pricing
Agreements
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20. The OECD guidelines Chapter IV sub-part F(1)
define APA as:
―An arrangement that determines, in advance (emphasis added) of
controlled transactions, an appropriate set of criteria (e.g., method, comparables
and appropriate adjustments thereto, critical assumptions as to future events) for
the determination of the transfer pricing for those transactions over a fixed period
of time.‖
Features of APA
• Agreement between taxpayer and host country‘s tax authority for fixed Transfer
APA — Definition
• Initiated before actual transaction takes place
• Aims at solving potential taxation dispute in a co-operative manner
• Seeks to determine an appropriate set of criteria for the computation of the
transfer price (including TP method to be applied, critical assumptions, etc.)
• Tax authority cannot challenge the determination of the arm‘s length price during
the audit proceedings
• Can be applied for variety of transactions such as sale/purchase of goods,
provision/receipt of services, intangibles, cost sharing, etc.
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21. Types of APA
Unilateral
Bilateral
Multilateral
APA between taxpayer and tax authority of
domestic country
APA between taxpayer and two tax
authorities
APA between taxpayer and multiple tax
authorities
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22. Stages in an APA
Stage 1: Preparatory stage:
•Initial stage wherein both the taxpayer and tax authorities assess
feasibility and possibility of concluding an APA
•The taxpayer is required to provide a broad outline of its case at the time
of filing its expression of interest/request for a prefiling meeting
Stage 2 : Formal application
•The prefiling discussion is followed by filing of a formal application by
the taxpayer for the APA
•The documents and information required to be submitted with the APA
application varies from country to country
•The formal application would normally include full details of the
proposed TPM and be supported by relevant information
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23. Stage 3 :Analysis and evaluation
•After receipt of the formal application the tax authorities undertake
evaluation of the details of the transaction under examination and other
information submitted by the taxpayer
•In their meeting with the taxpayer the review team/tax authorities discuss
the information submitted and, if necessary, request any further
information deemed relevant to consider the proposed TPM
Stage 4 : Draft APA negotiations
•This stage can be seen as the most crucial part of the entire APA scheme
•In this stage, the taxpayer and the tax authorities have opportunities to
express, argue, substantiate and negotiate their understanding
•After approval of preliminary conclusion, the tax authorities further
negotiate with the taxpayer on APA terms
Stage 5 : Signing of APA
•Last stage in the process of finalization of an APA
•Legal representatives or their appointed persons from both sides should
formally
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•sign the Advance Pricing Agreement

24. Advantages of APA
• Certainty of tax treatment
• Freedom from transfer pricing penalties and audits
• Avoidance of double taxation in BAPA
• Avoidance of potential examination/controversy procedures
• Narrowing of record keeping obligations
• Time and cost savings
• Undertaken in co-operative manner, allows flexibility and
efficiency in arriving at appropriate transfer pricing
methodology
• Assist tax authority in gaining insight into complex
international transactions
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25. INCOME TAX SETTLEMENT
COMMISSION
AN EFFECTIVE TOOL FOR
TAX DISPUTE
RESOLUTION:
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26. SETTLEMENT COMMISSION
 Settlement Commission constituted by
central government under section 245B of IT
Act,1961 is known as INCOME TAX
SETTLEMENT COMMISSION.
 It includes Chairman, the Vice Chairman and
other members to deal with assessment or
reassessment or appeal or revision in
connection with such assessment or
reassessment, which may be pending before
Income tax authority.
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27. JURISDICTION AND POWER OF
COMMISSION
 Jurisdiction, power and authority of the
settlement commission may be exercised by
benches thereof.
 Benches shall be presided over by the chairman
or a vice chairman and shall consist of two
members.
 The bench for which chairman is the presiding
officer shall be the principle bench and others
shall be known as additional bench.
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28.  The Chairman may authorize the ViceChairman or other Member appointed to one
Bench to discharge also the functions of the
Vice-Chairman or, as the case may be, other
Member of another Bench.
 When one of the persons constituting a
bench is unable to discharge his functions
owing to absence or illness, the remaining
two persons may function as the Bench and
if the Presiding Officer of the Bench is not
one of the remaining two persons, the senior
among the remaining persons shall act as
the Presiding Officer of the Bench.
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29. Vice chairman to act as
Chairman
 In the event of the occurrence of any
vacancy in the office of the Chairman by
reason of his death, resignation or otherwise,
the Vice-Chairman or, as the case may be,
such one of the Vice-Chairmen as the Central
Government may, by notification in the
Official Gazette, authorize in this behalf, shall
act as the Chairman until the date on which a
new Chairman, appointed in accordance with
the provisions of this Chapter to fill such
vacancy, enters upon his office.
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30. APPLICATION FOR SETTLEMENT
OF CASES (Section: 245C)
 An assessee may, at any stage of a case relating
to him, make an application in such form and in
such manner as may be prescribed, and
 containing a full and true disclosure of his income
which has not been disclosed before the
Assessing Officer, the manner in which such
income has been derived, the additional amount of
income-tax payable on such income and such
other particulars as may be prescribed,
 to the Settlement Commission to have the case
settled and any such application shall be disposed
of in the manner hereinafter provided:
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31. Provided that no such application
shall be made unless:
(i) The assessee has furnished the
return of income which he is or
was required to furnish under any
of the provisions of this Act; and
(ii)The additional amount of incometax payable on the income
disclosed in the application
exceeds one thousand rupees.
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32. Procedure on receipt of an
application under section 245C
 On receipt of an application under section 245C,
 the Settlement Commission shall call for a report
from the Commissioner and on the basis of the
materials contained in such report or the
complexity of the investigation involved therein,
 The Settlement Commission, shall, where it is
possible, by order, reject the application or allow
the application to be proceeded with within a
period of one year from the end of the month in
which such application was made under section
245C.
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33.  Subject to the provisions of sub-section (2B), the
assessee shall, within thirty-five days of the
receipt of a copy of the order under sub-section
(1) allowing the application to be proceeded with,
pay the additional amount of income-tax payable
on the income disclosed in the application and
shall furnish proof of such payment to the
Settlement Commission.
 Where the additional amount of income-tax is not
paid within the time specified under sub-section
(2A), the assessee shall be liable to pay simple
interest at fifteen per cent per annum on the
amount remaining unpaid from the date of expiry
of the period of thirty-five days referred to in subsection (2A)
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34.  Where an application is allowed to be
proceeded with under sub-section (1), the
Settlement Commission may call for the
relevant records from the Commissioner and
after examination of such records, if the
Settlement Commission is of the opinion that
any further enquiry or investigation in the
matter is necessary, it may direct the
Commissioner to make such further enquiry
or investigation and furnish a report on the
matters covered by the application and any
other matter relating to the case.
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35. POWER TO ORDER
PROVISIONAL ATTACHEMENT
TO PROTECT REVENUE
 Where, during the pendency of any proceeding
before it, the Settlement Commission is of the
opinion that for the purpose of protecting the
interests of the revenue it is necessary so to do, it
may, by order, attach provisionally any property
belonging to the applicant.
 Every provisional attachment shall cease to have
effect after the expiry of period of six months.
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36. POWERS AND PROCEDURES
OF SETTLEMENT COMMISSION
 In addition to the powers conferred, it shall
have all the powers which are vested in an
income-tax authority.
 Where an application made under section
245C has been allowed to be proceeded
with under section 245D, the Settlement
Commission shall, until an order is passed
have, exclusive jurisdiction to exercise the
powers and perform the functions of an
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income-tax authority.& Atmiya

37. The Settlement Commission shall,
subject to the provisions of this
Chapter, have power to regulate its
own procedure and the procedure of
Benches thereof in all matters arising
out of the exercise of its powers or of
the discharge of its functions.
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38. ORDER OF SETTLEMENT TO BE
CONCLUSIVE
Every order of settlement passed under
sub-section (4) of section 245D shall be
conclusive as to the matters stated
therein and no matter covered by such
order shall, save as otherwise provided
in this Chapter, be reopened in any
proceeding under this Act or under any
other law for the time being in force.
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39. SLP BEFORE
SUPREME
COURT
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40. INTRODUCTION
 Under Article 136 of the Constitution of India
any person aggrieved by any judgment,
decree, determination or order in any cause
or matter passed or made by any Court or
Tribunal in the territory of India
 May make an appeal to the Supreme Court
of India. Accordingly a person aggrieved by
any order or judgment of High Court or of
Tribunal may appeal to the Supreme Court by
filing Special Leave Petition.
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41. PROCEDURE FOR FILLING
SPECIAL LEAVE PETITION
 Time limit:
(i) If the Petition is filed against the
Judgment
of the High Court, the
time limit is 90 days from the date of
Judgment/Order.
(ii) If the Petition is filed against the
Order of High Court refusing to grant
Certificate of Fitness for Appeal, the
time limit is 60 days from the date of
Order refusing to grant Certificate.
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42. PREPARATION OF PETITION
The petition should state succinctly all facts
as may be necessary to enable the Court to
determine whether SLP ought to be granted
or not! The petition should be signed by
Advocate on record of the Petition.
The petition should be accompanied by a
certified copy of the judgment appealed
against and an affidavit of Petitioner
verifying the petition.
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43.  The annexure to the Petition; i.e., Exhibits to the
Petition should be certified copies of documents
which had formed part of the record in the High
Court. If the certified copies are not available,
uncertified copies can be filed and an affidavit
verifying the Annexure as true copy should also
be filed.
 Affidavit verifying the petition is required to be
filed along with the SLP. It should be typed on
plain white paper;
 If the petition is filed beyond 60/90 days the
affidavit should be filed explaining the time taken
for obtaining certified copy and/or the reason for
delay.
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44. INTERIM RELIEF
 If any interim relief is required a separate
application should be filed giving facts and
circumstances as to why interim relief is
sought from the Court.
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45. Thanking You…
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