In a bid to free up working capital and ease the burden of businesses, tax experts have urged the government to relax the provisions of submitting a pre-deposit amount in case any business wishes to get a stay on income tax demand.
Experts say the pre-deposit amount, which sometimes is to the tune of hundreds of crores of rupees, leaves a dent on the financial liquidity of the company, as the process of appeal-process getting finalised is sluggish in the country.
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According to section 254 of the Income Tax Act, any taxpayer (say a company) is mandated to pre-deposit 20% of the outstanding tax demand, if he/she wants a stay on that demand from the Income Tax Appellate Tribunal (ITAT).
Although, it is not a condition for filing an appeal to the ITAT, however, this pre-deposit is required so that tax recovery proceedings are not initiated against the taxpayer during the pendency of appeal. According to official sources, the number of appeals pending with ITATs are over 23,000.
Rohinton Sidhwa, partner, Deloitte India said that a limit of 20% should be done away with. “ITAT can provide a stay based on facts of each case considering legal merits and financial position of the taxpayer with an outer limit of 20% to be paid,” he said.
Manish Garg, lead-transfer pricing and Litigation, AKM Global said that there are increasing instances of ineffective assessment made by assessing officers, due to which taxpayers face the burden of filing appeals to ITAT. “If the threshold (of 20%) is removed, it may ease pressure on the taxpayers community and stay can be granted without need of pre-deposit,” he added.
Experts have also recommended the government to find ways to accelerate the disposal of appeals, pending at the Commissioner of Income Tax (Appeals) level, as that would lead to tax certainty and enhance taxpayers’ confidence. As of August end, the number of appeals pending at CIA(A) was around 600,000.
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Sanjoli Maheshwari, executive director, Nangia Andersen India said that the government should allow clubbing of appeals of the taxpayers pertaining to different assessment years with the same issues. Further, a threshold can be applied, of say Rs 10 crore,
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