Govt raises threshold for filing tax appeals to cut down litigation

IN HC, THE THRESHOLD WILL NOW BE ₹50 LAKH INSTEAD OF ₹20 LAKH EARLIER; IN SC, IT

WILL BE ₹1 CR, UP FROM ₹25 LAKH PREVIOUSLY

NEW DELHI: The government on Wednesday sharply increased the monetary threshold for filing appeals in tax disputes in various courts and decided to withdraw many pending appeals to cut down litigation and improve ease of doing business.

The monetary threshold for filing appeals in tribunals handling income tax as well as customs, excise and service tax disputes has been doubled from ₹10 lakh to ₹20 lakh, the finance ministry said. In high courts, the monetary threshold will now be ₹50 lakh instead of ₹20 lakh earlier. In the Supreme Court, the threshold has been increased from ₹25 lakh to ₹1 crore.

The success rate of the government in these disputes has been very poor as officials routinely filed appeals without deviating from the precedent set by other officials in similar cases.

The ministry also said that as a result of the substantially raised threshold, a large number of appeals will be withdrawn from various courts. It said that 34% of the cases, out of the total number of direct tax appeals filed by the department in the Income Tax Appellate Tribunal (ITAT), will be withdrawn.

The ministry did not specify the exact number of cases. However, minister of state for finance Santosh Kumar Gangwar had informed the Parliament in April 2017 that more than 88,730 direct tax cases were pending before the tribunal, though some of the appeals may have been filed by the assessee.

As many as 48% of cases in high courts and 54% of cases in the apex court will be withdrawn, said the ministry. Gangwar said 41,960 direct tax cases were pending in high courts and 5,272 in Supreme Court.

Direct tax disputes from the tax department will be reduced by two-fifth, but this will not apply in cases where a substantial point of law is involved, said the ministry.

Experts said the move makes monetary threshold for appeals realistic. “What remains is to also provide a framework for clarifications to be issued where substantial questions of law are involved, since different benches end up taking differing views and matters are not resolved until they reach the SC. A classic case in point is the matter related to software payments. Clarity and consistency in tax policies are key and this is one step in that direction,” said tax expert Abhishek Goenka.