Overview

Legislation
What is the relevant legislation relating to tax administration and controversies? Aside from legislation, are there other binding rules for taxpayers and the tax authority?

The Income Tax Act 1961 (ITA), read along with the Income Tax Rules 1962, governs the tax legislation and tax controversies in India. Along with this, the tax treaties entered into by the government of India with countries across the globe and the judicial precedents laid down by various judicial fora, which include the Supreme Court of India and the high courts, assist in resolving tax controversies in India.

The Central Board of Direct Taxes (CBDT) is engaged in the general administration and supervision of the ITA. It provides inputs for policy and planning of direct taxes in India, which includes powers to issue rules, circulars, notifications and orders for the proper administration of the ITA, and the same are binding upon all tax authorities.

Goods and services tax (GST) is leviable on taxable supply of goods or services, or both. The Central Goods and Services Tax Act 2017 (CGSTA) and the Integrated Goods and Services Tax Act 2017 (IGSTA) are formulated by the central government and are for intra-state and inter-state supply of goods or services respectively. The Union Territory Goods and Services Tax Act 2017 (UTGSTA) and various state GST Acts are formulated for levy of Goods and Services Tax (GST) on intra-state or union territory supply of goods, services or both in the respective union territory or state. The Goods and Services Tax (Compensation to States) Act 2017 was been formulated by the central government for levy of compensation cess on certain specified, but limited, supplies.

Relevant authority
What is the relevant tax authority and how is it organised?

The relevant tax authorities are the CBDT and Central Board of Indirect Taxes and Customs (CBIC), which are both part of the Department of Revenue in the Ministry of Finance. Matters relating to the levy and collection of all direct taxes are looked after by the CBDT.

The officials of the CBDT in their ex-officio capacity also function as a division of the Ministry of Finance dealing with matters relating to the levy and collection of direct taxes. The Chairman, who is also an ex-officio Special Secretary to the government of India, heads up the CBDT. In addition, the CBDT has six members, who are ex officio Additional Secretaries to the government of India.

The hierarchy of the tax authorities under the ITA (in order of seniority) is as follows:

• CBDT;
• Directorate General of Income Tax or Chief Commissioner of Income Tax;
• Principal Commissioner of Income Tax;
• Commissioner of Income Tax and Commissioner of Income Tax (Appeals);
• Additional Commissioner of Income Tax;
• Joint Commissioners of Income Tax;
• Deputy Commissioner of Income Tax;
• Assistant Commissioner of Income Tax;
• Income Tax Officer;
• Tax Recovery Officer; and
• Inspector of Income Tax.

The highest authority appointed by the CBIC, regarding central tax, is the Principal Chief Commissioner, followed by the Chief Commissioner, Principal Commissioner, Commissioner, Additional Commissioner, Joint Commissioner, Deputy Commissioner, Assistant Commissioner and any other class of officers as the CBIC may deem fit. The provisions of the Customs Act are administered by the customs officials appointed under the Act in the same hierarchy as under GST, whereas for levy of VAT on goods outside the purview of GST, the states have appointed commercial tax officers.

Enforcement

Verification of compliance with tax laws
How does the tax authority verify compliance with the tax laws? Does this vary for different taxpayers or taxes?

In India, the tax year begins on 1 April and ends on 31 March. The Income Tax Act (ITA) provides a mechanism to taxpayers for declaring income, filing the return of income and paying the tax due in a timely manner.

For verifying whether the taxpayer has complied with the tax laws and made payment of taxes in time, the tax authorities review the tax return electronically. On review of the tax return, the tax authorities may select the tax return either for a limited scrutiny – in which the review is limited to specific reasons or issues, or for a detailed scrutiny – in which there is detailed examination or assessment of the issues involved. Such scrutinisation procedures are quasi-judicial proceedings.

The tax authorities normally conduct the review in the form of a personal appearance of the taxpayer or through an authorised representative appointed by the taxpayer. However, recently, the tax authorities have started conducting these reviews electronically as well.

In India, indirect tax compliances are generally on a self-assessment basis. The tax department usually inspects a taxpayer when a proper officer, not below the rank of Deputy Commissioner, has reason to believe that the taxpayer has suppressed any transaction or escaped any payment of tax. This decision is based on a risk profiling of the taxpayer looking at their past tax history, current tax disputes, high income and allied criteria.

Tax return review procedure and limitation periods
What is the typical procedure for the tax authority to review a tax return and how long does the review last? What limitation periods apply?

Under the ITA, the tax authorities are empowered to initiate a review of the tax return filed by the taxpayer, which is required to be completed within 12 months from the end of the relevant financial year and is extended by 12 months in transfer pricing cases.

However, in cases of income escaping assessment subject to specified conditions, the tax returns filed by a taxpayer can be made subject to a tax review until the end of the seventh year from the end of the relevant financial year by way of a reassessment proceeding. Moreover, the period gets extended to 17 years from the end of the relevant financial year if the escaped income is in relation to any asset located outside India.

The general period of limitation for review of a Goods and Services Tax (GST) return and raising of a demand is 33 months, and the period of limitation for issue of an order is three years from the due date for furnishing of the annual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilised relates to.

Tax authority requests for information
What types of information may the tax authority request from taxpayers? Can the tax authority interview the taxpayer or the taxpayer’s employees? If so, are there any restrictions?

Under the ITA, for the purpose of verifying the correctness of the tax return filed by the taxpayer, during detailed scrutiny or assessment the tax authorities may request the taxpayer to provide books of account along with other related documents such as financial records, vouchers, invoices, agreements, bank statements and any other evidence that the tax officer finds it necessary to examine.

GST laws prescribe that certain documents be maintained by all taxpayers to justify the claim in respective tax returns. These documents can be asked for by the tax authorities during the review of the tax return, and the taxpayer is under legal obligation to present them. They include transaction-related documents, bills, et al.

Taxpayer failure to provide information
What actions may the tax authority take if the taxpayer does not provide the required information?

Under the ITA, where there is wilful failure on the part of the taxpayer to provide or produce the documents during the time of scrutiny or assessment, then the tax authorities may levy a penalty of 10,000 rupees for each instance of failure. In addition, depending on the facts of the case, the tax authorities may also initiate prosecution of the taxpayer, who could face rigorous punishment in the form of imprisonment for a term that may extend to one year along with a fine.

Under GST, a penalty not exceeding 5,000 rupees can be levied if the person fails to furnish the information required.

Protecting commercial information
How may taxpayers protect commercial information, including business secrets or professional advice, from disclosure? Is the tax authority subject to any restrictions concerning what it can do with the information disclosed?

The information exchange between taxpayers and their legal advisors, which includes commercial information, business secrets and professional advice, is protected from disclosure through attorney–client privilege under the Indian Evidence Act 1872.

The tax authorities are not under a statutory obligation to maintain the confidentiality of the information shared by the taxpayer. Where the privacy of taxpayers is violated, there lies effective remedy in the Constitutional Courts.

Under GST laws, the information shared between taxpayer and lawyers is protected by attorney-client privileges guaranteed under the Indian Evidence Act 1872. Also, as per the indirect tax laws, the tax authorities are empowered to enquire about and request any document or information whether it is confidential or not.

Limitation period for reviews
What limitation period applies to the review of tax returns?

Alternative dispute resolution
What (if any) alternative dispute resolution (ADR) or settlement options are available?

Under the ITA, the dispute resolution mechanism or settlement options available to taxpayers are as follows.

A Dispute Resolution Panel (DRP) is a mechanism that applies to Indian companies where the tax authorities have proposed adjusting the arm’s-length price. The direction from DRP is required to be passed within nine months from the end of the month in which the draft order is forwarded to the taxpayer by the tax officer. Such directions issued by the DRP are binding on the tax officer, who is required to pass the final order based on such directions, which is appealable directly before the second appellate authority.

Mutual Agreement Procedure (MAP) is another alternative dispute resolution mechanism, available to the taxpayers covered by the Double Taxation Avoidance Agreement (DTAA). MAP can be resorted to where the taxpayer finds that the taxation is not in accordance with the DTAA regardless of remedies available in the ITA. The purpose behind MAP is to avoid double taxation for which the negotiations take place between the tax authorities of the countries that are parties to the DTAA.

Advance Ruling and Advance Pricing Agreements are ex-ante settlement options available to taxpayers. Under the Advance Ruling option, the taxpayer can approach the tax authorities to determine the taxability of a specified transaction in advance before entering the transaction, which is binding up to the second appellate authority. Similarly, taxpayers can also enter an arrangement with the tax authorities to determine the arm’s-length price of a transaction covered by the transfer pricing regulations in advance.

The GST laws in India allow for an appeal to be filed by a taxpayer or the tax authority against any order issued by an adjudicating authority or the appellate authority. The GST laws empower revisional authorities to revise an order passed by a subordinate authority. Appeal by the taxpayer against an order passed by the adjudicating authority, the appellate authority or the revisional authority can be filed within three months from the date of receipt of such order. There are no other settlement options currently available under Indian GST law.

Advance rulings are ex ante settlement options available to taxpayers. Under the advance ruling option, the taxpayer can approach the authority for advance rulings to determine the taxability of a specified transaction before entering the transaction. This option is available under GST law.

Collecting overdue payments
How may the tax authority collect overdue tax payments following a tax review?

Under the ITA, the tax authorities may collect the tax dues by sale or attachment of movable or immovable properties of the taxpayer. Alternatively, the tax authorities may resort to garnishee proceedings for the recovery of tax dues.

Any amount payable by a taxable person in pursuance of an order passed under the GST laws is required to be paid within three months from the date of service of the order, failing which, recovery proceedings shall be initiated. In the case of non-payment of the amount, the tax authorities may distrain any movable or immovable property belonging to or under the control of the taxable person.

Penalties – scope of application
How are penalties calculated?

What defences are available if penalties are imposed?

In what circumstances may the tax authority impose penalties?

Under the ITA, the tax authorities may impose a penalty in the case of under-reporting of income or in the case of misreporting of income by a taxpayer in the tax return. Misreporting of income is applicable to cases where there has been a concealment or suppression of income by the taxpayer, whereas under-reporting refers to the cases where the income assessed by the tax authorities is more than the income reported by the taxpayer in the tax return.

The GST laws provide for the imposition of penalties in case of non-payment of tax, short payment, erroneous refund or wrongful availment or utilisation of input tax credit.

Penalties – calculation
How are penalties calculated?

The penalties levied under the ITA can be either fixed amounts or ad valorem on the amount of tax evaded. The penalty for under-reporting of income is 50 per cent of the amount of tax payable on the under-reported income. The penalty amount for misreporting of income is 200 per cent of the amount of tax payable on the under-reported income. Penalty for offences related to not furnishing returns and not complying with notices can be up to 10,000 rupees per offence.

Under the GST laws, the penalties are calculated as a percentage of the tax amount due to be paid to the government. Depending on the nature of contravention or violation, the penalty amount ranges from 10 per cent of the tax amount to an amount equal to the tax due, namely, 100 per cent of the tax amount.

Penalties – defences
What defences are available if penalties are imposed?

Penalties cannot be imposed on the taxpayer if the taxpayer is able to prove that he or she was under a bona fide belief that there is reasonable cause for the failure. However, levy of penalty is at the discretion of the tax authorities.

Under GST laws, once the order levying penalty is passed by the tax authorities, the taxpayer can challenge the order before the appellate forum. Some of the grounds on which penalty imposed by the tax authorities can be set aside are absence of mens rea and bona fide intent of the party.

Collecting and calculating interest
In what circumstances may the tax authority collect interest and how is it calculated?

Under the ITA, different types of interest are levied for various kinds of delays or defaults. Interest is levied for:

• delay in filing the return of income;
• non-payment or short payment of advance tax; and
• automatically levied on delay or failure in payment of taxes within the prescribed time limits.

Criminal consequences
Can criminal consequences arise as a result of tax non-compliance? Are these different for different types of taxpayers?

Yes, criminal prosecution can be initiated because of a tax review initiated by the tax authorities. Under the ITA, a few of the circumstances under which prosecution proceedings can be so initiated are as follows:

• failure to pay tax withheld to the credit of the central government;
• wilful attempt to evade tax, penalties or interest chargeable or imposable; and
• wilful failure to furnish returns of income in due time.

It is noteworthy that all the offences under the ITA are compoundable in nature.

The GST laws provide for criminal consequences for, by way of example, the following types of offences:

• wilful failure by the taxpayer to produce accounts or documents;
• false statement made by the taxpayer; and
• falsification of books of accounts or documents.

Tax avoidance
Are there specific rules or provisions regarding perceived tax avoidance?

There has been an increasing focus on sharing of information between Indian tax authorities with their foreign counterparts on tax avoidance. As a part of G20 and OECD countries, India is working towards developing a Common Reporting Standard on Automatic Exchange of Information, which requires financial institutions to collect and report information to the relevant tax authorities about account holders ‘resident’ in other countries. Such information is automatically transmitted to the tax authorities in other jurisdictions.

The exchange of information is primarily meant to determine if there is a case of tax evasion or tax avoidance by the taxpayer. The tax department also obtains the required information from foreign tax authorities to conduct an effective assessment. Such an exchange of information can be upon specific request by the other country under the tax treaty.

Enforcement record
What is the recent enforcement record of the authorities?

The income tax department has uncovered tax evasion of around 100 million rupees in the past three years. The rate of compliance to standard tax practices has seen a boost by 15 per cent in the same period.

Third parties and other authorities

Third-party involvement with tax reviews
Does the tax authority cooperate with other authorities within the country? Does the tax authority cooperate with the tax authorities in other countries?

Can a tax authority involve third parties as part of the authority’s review of a taxpayer’s returns?

The tax authorities are empowered to call for information from third parties such as stockbrokers and banks as a part of the review. The tax authorities can require them to furnish information in relation to specific points or to furnish statements of accounts and affairs that they think might be useful in proceedings.

If any third party fails to furnish in due time any information, statement or other document as required by the tax authorities, then the tax authorities have an option to impose a penalty on such person for their failure to comply with the directions of the authorities.

In addition to the above, the tax authorities have the power to issue a summons, and they have the same powers as those of a civil court trying a suit. Such powers include discovery and inspection, enforcing the attendance of any person (including any officer of a banking company) and examining him or her on oath, compelling the production of books of accounts and other documents.

Cooperation with other authorities
Does the tax authority cooperate with other authorities within the country? Does the tax authority cooperate with the tax authorities in other countries?

The tax authorities cooperate with several authorities in India, including the Serious Fraud Investigation Office, National Intelligence Grid, Ministry of Corporate Affairs, Central Board of Direct Taxes, and Central Board of Indirect Taxes and Customs, Ministry of Finance, Directorate of Enforcement and various other enforcement agencies. For the purposes of Customs, the officials cooperate with these agencies.

The Indian tax authorities also cooperate with tax authorities in other countries to share information. India has entered into a few double tax avoidance agreements, tax information exchange agreements, free trade agreements, progressive trade agreements and comprehensive economic partnership agreements with other jurisdictions.

Financial or other hardship

Voluntary disclosure and amnesties
Do any special procedures apply in cases of financial or other hardship, for example when a taxpayer is bankrupt?

There is no special procedure prescribed under the Income Tax Act that applies in the case of financial or other hardship being faced by the taxpayer. However, in some cases, to remove genuine hardships from taxpayers, the board may give some exemptions through a general or specific order. Similarly, there is no special procedure prescribed under the indirect tax laws that apply in the case of financial or other hardship being faced by the taxpayer.

Are there any voluntary disclosure or amnesty programmes?

There have been some voluntary disclosure and amnesty programmes in the past. However, it is very uncertain whether similar schemes will be launched in the future. Likewise, there are no specific amnesty programmes provided in the indirect tax laws. However, the benefit of a reduced quantum of penalty can be availed if the tax and interest short paid are paid voluntarily within a specified time frame.

Rights of taxpayers

Rules protecting taxpayers
What rules are in place to protect taxpayers when dealing with the tax authority?

There is a Taxpayers’ Charter issued by the Income Tax Department that expresses commitment towards, for example, accountability, equity and transparency. Further, a hierarchy of grievance cells at the central and regional levels has been created in the Income Tax Department for prompt redressal of public grievances, safeguarding the rights and dignity of taxpayers and enforcing higher standards of accountability on officers and staff of the department by taking disciplinary action against erring persons in selected cases.

Requesting information from tax authority
How can taxpayers obtain information from the tax authority? What information can taxpayers request?

A taxpayer can inspect as well as obtain certified copies of the assessment and other records on payment of prescribed fees. Normally, the request for inspection or copies of the assessment or other records is complied with within three days of receipt of such request.

A third party can also make an application, to the Principal Chief Commissioner or Chief Commissioner, or Principal Commissioner or Commissioner, in the prescribed form for obtaining any information relating to any assessee received or obtained by the income tax authorities in performance of their functions. If the Principal Chief Commissioner or Chief Commissioner, or Principal Commissioner or Commissioner is satisfied that it is in the public interest to do so, he or she will furnish such information as requested by the third party.

Oversight of tax authority governance
Is the tax authority subject to non-judicial oversight?

Yes, the tax authorities are subject to internal audit conducted under the aegis of the Comptroller and Auditor General of India. The objective of this internal audit is to ensure that the tax officer has not made any errors, omissions and mistakes in the assessments and if so, ensuring remedial action in respect of the same. If any error or mistake is found in the assessment made by the tax authorities, then it is communicated to the respective tax officer by the audit team in the form of an audit objection, and the officer is required to initiate appropriate remedial action within two months of receiving the audit objection.

Court proceedings

Competent courts
Which courts have jurisdiction to hear tax disputes?

Typically, the tax dispute first arises before the tax authority, which acts in a quasi-judicial manner. It acts as both investigator and adjudicator. The powers of the first appellate body are co-extensive and coterminous to the primary tax authority. The second appellate forum is also a quasi-judicial one – the Income Tax Appellate Tribunal (ITAT), where the appeal is heard in a manner like that of a civil court. The next two appellate fora, the high court and the Supreme Court, are formal civil courts that deal with only those matters that involve a substantial question of law.

Under indirect tax, the court of first instance for tax disputes is the Customs Excise and Service Tax Appellate Tribunal (the Tribunal). The Tribunal adjudicates disputes in relation to questions of law, questions of fact or both. Taxpayers can file an appeal before the Tribunal without any restriction; however, for the tax authorities, the Central Board of Indirect Taxes and Customs prescribes monetary limits of tax demand, from time to time, exceeding which a case can be appealed before the Tribunal.

Lodging a claim
How can tax disputes be brought before the courts?

The Constitution of India also provides an alternate remedy to taxpayers by way of a writ petition before the jurisdictional high court. A writ petition can be filed if gross injustice has been caused to the taxpayer by way of abuse of powers by the tax authorities, or there is wrongful exercise or excessive exercise of jurisdiction. A writ can also be issued to quash an order that is vitiated by an error apparent on the face of the record or that is passed in violation of the principles of natural justice. The high court may issue a writ to release an assessee from illegal detention by the officer concerned. The court will interfere by way of writ if the action is mala fide or arbitrary or does not comply with the statutory requirement. A writ petition acts as an effective tool in the legal system of India, leading to speedy redressal of the grievances of taxpayers and coming to the rescue of them as an overstepping authority in the case of injustice caused by the authorities.

Combination of claims
Can tax claims affecting multiple tax returns or taxpayers be brought together?

Yes, tax claims affecting multiple tax returns are brought together by the appellate fora for the sake of convenient adjudication. Multiple taxpayers are also brought together before the ITAT and higher appellate fora for the sake of convenient and expeditious adjudication where common issues are to be adjudicated upon.

From an indirect tax adjudication perspective, yes, the Tribunal and the courts have the power to bring multiple claims together so that they can be heard at the same time, to pass litigation orders. Orders can be made for bringing multiple cases together by the Tribunal or court on its own initiative, or at the request of the parties.

Pre-claim payments
Must the taxpayer pay the amounts in dispute into court before bringing a claim?

The taxpayer need not pay the whole amount of tax in dispute before bringing a claim before the court and can apply for a stay in respect of the demand raised by the tax authorities. The stay is granted by the tax authorities either on the complete amount of the tax demand or on deposit of a percentage of the amount of tax in dispute, which in the case of income tax is 20 per cent for the first appellate authority, depending upon the circumstances.

In the case of indirect tax disputes, the taxpayer need not pay the whole amount of tax in dispute before bringing a claim before the court; however, a certain percentage of the disputed amount is required to be paid before preferring an appeal before the appellate authority or the Tribunal.

Cost recovery
To what extent can the costs of a dispute be recovered?

It is in the inherent powers of the Tribunal and the courts to award costs to the taxpayer as well as to the tax authorities, as the case may be, if they consider that one of the parties has acted unreasonably in bringing, defending or conducting the proceedings before them. However, generally, it has been observed that it is difficult for litigants to recover the costs.

Third-party funding
Are there any restrictions on or rules relating to third-party funding or insurance for the costs of a tax dispute, including bringing a tax claim to court?

The income tax law is silent about third-party funding or insurance for the costs of a tax dispute, including bringing a tax claim to court. There appears to be no restriction on third parties (non-lawyers) funding the litigation and getting repaid after the outcome of the litigation. A taxpayer can also buy an insurance policy to cover the costs of a tax dispute.

Availability of jury trials
Who is the decision maker in the court? Is a jury trial available to hear tax disputes?

The decision maker in the ITAT is a bench consisting of a judicial member and an accountant member. In a high court and the Supreme Court, appeals are decided by a bench consisting of two or more judges. Depending on the stage of proceedings, the forum for adjudication will vary and accordingly so will the decision maker. In the Tribunal, the decisionmaker comprises a judicial member (having a law degree and a minimum of 10 years’ experience in law practice) and a technical member (member of Indian Customs or Central Excise Service Group A, or both, and who has held the post of Commissioner or above for at least three years). However, in the Goods and Services Tax (GST) Appellate Tribunal (yet to become functional), the bench shall comprise a judicial member and two technical members (one representing the centre and the other the state). In both, in the court of first and second appeal, namely, the high court and Supreme Court respectively, the decision maker is a division bench comprising two judges. Jury trial is not available for hearings of tax disputes in India.

Time frames
What are the usual time frames for tax hearings?

Tax trials, in other words, assessment proceedings before the tax officer, are required to be completed within two years from the end of the relevant financial year, which is extended to three years where the taxpayer has entered international transactions, and the case is referred to the transfer pricing officer. The time frame for each trial under indirect tax depends on the nature and complexity of the underlying dispute. Before a tax dispute reaches the tax tribunal, the adjudicating tax authorities may take about two years (first authority) plus another one to two years (appellate authority) for completion of the first appellate proceedings.

Disclosure requirements
What are the requirements concerning disclosure or a duty to present information for trial?

The tax authority, while conducting the trial, is bestowed with immense powers to call for information as well as personal presence. In its quest for information, the tax authority can in specified circumstances resort to the rather intrusive procedure of a survey at the business premises of the taxpayer.

During a tax trial before the court or before the tax tribunal, the parties file all the documents they seek to rely upon. If any such document was not produced at any stage before the tax authorities prior to approaching the Tribunal or court, liberty for relying on it must be sought before producing it. The Tribunal and court have inherent powers to summon production of such additional documents as they deem fit for adjudication of the dispute.

Permitted evidence
What evidence is permitted in tax hearings?

Oral as well as documentary evidence is permitted during the trial. The taxpayer is permitted to testify – in fact, the trial is based primarily on information furnished by the taxpayer. Testimony of the taxpayer is subject to the discretion of the tax authorities. 

Permitted representation
Who can represent taxpayers in a tax trial? Who represents the tax authority?

Normally, the taxpayer can be represented by an advocate or a local certified public accountant before the tax tribunal; and by an advocate before the high court and Supreme Court. If the taxpayer so decides, he or she can also represent themself before all the courts. Pro bono legal services are provided by various institutions if a taxpayer cannot afford legal representation.

Publicity of proceedings
Are tax hearings public?

The proceedings before the tax authorities are conducted in person and are not public. However, the proceedings before the Tribunal or the courts are conducted in an open court. The written orders passed in such proceedings are also available to the public on the websites maintained by the respective forums. Certified copies of the documents filed by litigants in the courts are made available to the public only upon a specific request put forward.

Burden of proof
Who has the burden of proof in tax hearings?

The burden of proof in a tax trial is on the taxpayer regarding the claims made by the taxpayer. The burden shifts upon the tax authority regarding the disallowance of expenditure or addition of income made during the trial, except in certain circumstances.

Case management process
What is the case management process for a tax hearing?

Tax trials are conducted by numerous jurisdictional tax authorities across the country as per the subjective administrative convenience and the time limits laid down in law. As there is no formal court conducting the trial, there is no formal case management process for a tax trial.

Appeal
Can a court decision be appealed? If so, on what basis?

Yes, a court decision can be appealed. Appeal against an order of the ITAT can be made before the high court only if it involves a substantial question of law. A decision of the high court, which presents a substantial question of law, or deals with questions upon which there are conflicting decisions of the High Court, may be appealed against before the Supreme Court.

Update and trends

Key developments of the past year
What are the current trends in enforcement of tax controversies? What are the current concerns of the authorities and taxpayers in relation to the enforcement and handling of tax controversies and are these likely to change? Are there proposals to change the relevant legislation or other rules?

India has not opted to apply Part VI to its covered tax agreements, which require mandatory binding arbitration. India does not accept a mandatory binding arbitration mechanism specifically for tax disputes on grounds of sovereignty. Despite India’s reservations on mandatory binding arbitrations for tax disputes, some non-resident taxpayers such as Vodafone and Cairn have invoked India’s bilateral investment treaties (BITs) resulting in long-running tax disputes over India’s retrospective taxation regime. Hence, in the revised model BIT, taxation matters have been excluded.

The government of India has taken a policy stance that taxation is an integral function of the state’s sovereignty. Hence, India has not agreed to the position that such matters may be escalated under the treaty dispute settlement mechanism.

As matters stand, there are between 120,000 and 140,000 cases pending before the Income Tax Appellate Tribunal and other tax tribunals on tax disputes. Before the high courts, there are approximately 40,000 to 50,000 cases pending, while before the Supreme Court there are approximately 6,000 tax cases pending, as of the last financial year.

Coronavirus
What emergency legislation, relief programmes and other initiatives specific to your practice area has your state implemented to address the pandemic? Have any existing government programmes, laws or regulations been amended to address these concerns? What best practices are advisable for clients?

Law stated date

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