Cross border tax litigation to be made simpler

In a bid to grow investor friendly, the Government of India is now planning constituting panels comprising senior income tax officials for a quick resolution of cross border taxation disputes.

In a bid to grow investor friendly, the Government of India is now planning constituting Dispute Resolution Panels comprising senior income tax officials for a quick resolution of cross border taxation disputes.

The panels are proposed to be set up in Delhi, Mumbai, Ahmedabad, Kolkata, Chennai, Hyderabad, Bangalore and Pune. Currently, an order of the Commissioner goes through 3 appellate stages before it reaches the concerned High Court.

The proposed amendment to the Income Tax Act, if effected, will remove two of the three appellate stages. An appeal from the order of a Commissioner would lie directly to the panel, and an appeal therefrom, to the Income Tax Appellate Tribunal. Reports indicate that the IT department claims over Rs 2,00,000 crore ($43.15 billion) is locked up at various stages of disputes.

The panel of commissioners is expected to consider appeals from aggrieved tax payers within a month of receiving the draft assessment order. The panel's decision is binding on the Income-tax (IT) department, which is not allowed to appeal against the order before the I-T Appellate Tribunal. However, the tax payer is free to do so. The panel has the power to call for fresh evidence. 

There are several cross border taxation disputes pending across the country. More recently, Central Board of Direct Taxes issued a notice to Vodafone calling upon them to pay $ 2 Billion (Rs. 9,485 crore). Clifford Chance has been fighting the Revenue Department for the last 12 years on advice they rendered on an India related project.

The Government has called for objections to the proposed amendment, a copy of which is available here.