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Direct tax demands totalling ₹18-₹20 lakh crore are now being litigated in several areas, including transfer pricing, royalty payments, income classification, taxpayer deductions, and more, stated a senior government official. The amount of direct tax under litigation may change due to settlements, agreements, or alternative dispute resolution procedures used to resolve some tax disputes.
Direct tax litigation cases are legal issues arising from assessing and collecting direct taxes such as income tax, corporate tax, and capital gains tax. These instances usually involve disputes between taxpayers and tax authorities about interpreting or applying tax laws, rules, or assessments.
In India, direct tax litigation cases are quite common due to the complex tax laws and the large number of taxpayers. The Income Tax Appellate Tribunal (ITAT), High Courts, and the Supreme Court are the primary forums for resolving direct tax disputes.
The numerous ongoing direct tax litigation cases in India cover a wide range of issues such as transfer pricing, taxation of offshore transactions and transfer of assets, classification of income under various heads (salary, business income, capital gains, etc.), deductions claimed by taxpayers, tax treatment of restructuring; and interpretation of tax treaties and Double Taxation Avoidance Agreements (DTAA). The litigation cases span various sectors and industries, including Information Technology, manufacturing, pharma, realty and consumer goods.
On February 1, 2024, the Union Budget announced that the government would write off some controversial and minor tax claims of earlier years, totalling ₹3,500 crore. The tax demands the government announced would be dropped were linked to a total of 2.1 crore demand notices for amounts less than ₹25,000.
To reduce tax litigations and disputes, which were stuck due to inadequate data or dispute, the Finance Minister proposed to waive trivial outstanding tax demands of up to ₹25,000 for the period up to 2009-10. Additionally, outstanding disputes for amounts up to ₹10,000 for the years 2010-11 to 2014-15 will be waived.
Also Read : GST revenue collection hits record high of ₹2.10 lakh cr in April GST Council likely to discuss coinsurance, reinsurance issues at next meet
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