FM announces increase in monetary limit for filing tax litigation in tribunals, courts

Sitharaman proposed to increase monetary limits for filing appeals related to direct taxes, excise and service tax in the Tax Tribunals, High Courts and Supreme Court to Rs 60 lakh, Rs 2 crore and Rs 5 crore, respectively.

Finance Minister Nirmala Sitharaman announced an increase in the monetary limit for departments to file tax litigations in tribunal, high courts and the Supreme Court.

As a result of the increase, the government cannot pursue tax litigation if the amount in dispute is below the monetary limit, Sitharaman said in her Budget speech on July 23.

She said "I propose to increase monetary limits for filing appeals related to direct taxes, excise and service tax in the Tax Tribunals, High Courts and Supreme Court to Rs 60 lakh, Rs 2 crore and Rs 5 crore, respectively." As a consequence of this, if the amount in dispute is less than that mentioned above, the department cannot file an appeal.

This is a stark increase from the government's earlier policy with respect to direct tax litigation.

Under the 2019 policy for direct tax litigation, appeals before the Income Tax Appellate Tribunal (ITAT) could not be filed if the disputed amount was less than Rs 50 lakh, and for appeals before high courts, it was enhanced to Rs 1 crore, while for special leave petitions (SLPs)/appeals before the Supreme Court, the limit was Rs 2 crore.

Similarly, for central excise and service tax, the government can file an appeal in the Customs Excise Service Tax Appellate Tribunal (CESTAT) if the amount in dispute is a minimum of Rs 50 lakh, in HCs if it is Rs 1 crore and in the SC if its Rs 2 crore. For customs, the limit is Rs 5 lakh before CESTAT, Rs 10 lakh before HC, and Rs 25 lakh before the SC.

FM Sitaraman further said: "With a view to reduce litigation and provide certainty in international taxation, we will expand the scope of safe harbour rules and make them more attractive. We will also streamline the transfer pricing assessment procedure."

Vivad Se Vishawas 2024 announced:

The finance minister in her budget speech announced the Vivad Se Vishwas Scheme, 2024 with a view to bring resolution to certain income tax dispute.

This is the third Vivad Se Vishwas scheme overall and the second such scheme to bring down income tax disputes. In the 2023 budget, the government announced Vivad Se Vishwas 2.0 to settle contractual disputes between the government and private parties.

In 2020, the government announced the first version of Vivad se Vishwas to reduce legal disputes related to income tax. As per the statistics available, more than 148,000 cases were solved with the recovery of about 54 percent of the amount under litigation. The scheme started on March 17, 2020, and closed on March 31, 2021.

FM on direct tax litigation:

Speaking of the government's efforts to reduce direct tax litigation, FM Sitaraman said: "While our concerted efforts to reduce pendency of appeals at various appellate fora are beginning to show good results, it will continue to engage our highest attention."

The FM also announced deployment of more officers from the income tax department to hear appeals filed by assesses.