Govt hikes monetary limits for tax appeals

Seeking to reduce litigation pertaining to tax matters and facilitate ease of doing business, the government has increased the monetary threshold limits for departmental appeal sat various levels—appellate tribunals, high courts and the Supreme Court. This is the second time in two years that the threshold has been hiked for the Central Board of Direct Taxes and the Central Board of Indirect Taxes and Customs. DILASHA SETH writes

Seeking to reduce litigation pertaining to tax matters and facilitate ease of doing business, the government has increased the monetary threshold limits for departmental appeals at various levels — appellate tribunals, high courts, and the Supreme Court.

This is the second time in two years that the threshold has been hiked for the Central Board of Direct Taxes (CBDT) and the Central Board of Indirect Taxes and Customs (CBIC).

“Litigation cases have come down over the last two years and the move to further hike the threshold will cut that down further.

This is a major step in the direction of litigation management of both direct and indirect taxes as it will effectively reduce minor litigations and help the Department to focus on high value litigations,” said a senior government official.

The income tax department has been focusing on litigation management and dispute settlement for the last two years.

The monetary limits for filing appeals have been hiked to ~2 million from ~1 million for the Income Tax Appellate Tribunals (ITAT), ~5 million from ~2 million for high courts and by four times to ~10 million from ~2.5 million for the Supreme Court. This means that the two tax departments under the Department of Revenue will not be able to appeal in the SC if the tax case is less than ~10 million, less than ~5 million in the case of HC, and ~2 million in the case of ITAT or CESTAT.

The pending cases in ITAT, HCs and the SC add to the exchequer’s cost. Besides, only about 10 per cent of cases at the SC and HC level are decided in favour of the department, and 30 per cent at the ITAT or CESTAT level.

In the case of the CBDT, out of total cases filed by the department in ITAT, 34 per cent will be withdrawn. In the case of high courts, 48 per cent of cases will be withdrawn and in the case of the Supreme Court, 54 per cent of cases will be withdrawn. The percentage of reduction of litigation from department’s side will get reduced by 41 per cent, according to the Ministry of Finance. However, this will not apply in such cases where substantial point of law is involved.

Similarly, in the case of the CBIC, of the total cases filed by the department in CESTAT, 16 per cent will be withdrawn.

In the case of high courts, 22 per cent cases will be withdrawn and in the case of the Supreme Court, 21 per cent cases will be withdrawn. The total percentage of reduction of litigation from the department’s side will be 18 per cent. However, this will not apply in such cases where substantial point of law is involved.

This step will also reduce future litigation flow from the department side. Just two years ago, the CBDT and the CBIC had hiked the monetary limits for filing appeals to ~1 million, ~2 million and ~2.5 million for ITAT, HCs and the SC, respectively.