Tax Controversy & Dispute Resolution

The scheme of advance rulings seeks to achieve, through an inexpensive and expedited process, the following goals:

• » Clarity and certainty of tax liability in relation to a proposed activity, in advance;
• » Finality and avoidance of protracted litigation; and
• » Transparency.

The following persons can apply for an advance ruling:

• » A non-resident setting up a joint venture in India in collaboration with a non-resident or a resident;
• » A resident setting up a joint venture in India in collaboration with a non-resident; or
• » A wholly-owned subsidiary Indian company with a foreign holding company or a foreign company that proposes to undertake any business activity in India; or
• » A joint venture in India, that is to say, a contractual arrangement whereby two or more persons undertake an economic activity which is subject to joint control and one or more of the participants or partners or equity holders is non-resident having substantial interest in such arrangement; or

• » A resident falling within any such class or category of persons as the Central Government may by notification in the Official Gazette specify in this behalf. The Central Government has specified the following categories of persons as being eligible to seek advance rulings.

Over the past few years, Indian Government has undertaken several initiatives to reduce litigation. These includes the following:

• » Circulars issued by the Central Board of Direct Taxes (CBDT) clarifying tax position on several controversial tax issues.
• » Circulars issued on topics at nascent stage in the form of “frequently asked questions” for clarifying tax implications.
• » Understanding Stakeholder views are sought via draft Circulars on certain topics prior to issuance of final Circulars.
• » Increasing monetary threshold (i.e tax effect) for the tax authorities to prefer an appeal to the next appellate authority.

The monetary threshold limits (i.e tax effect) for Indian tax authorities to prefer an appeal to next appellate authorities is provided in table below:

Appellate Forum	Monetary Threshold limit
Income Tax Appellate Tribunal	Rs. 50 lakhs
High Court	Rs. 1 crore
Supreme Court	Rs. 2 crores

Income-tax Settlement Commission is a premier Alternative Dispute Resolution (ADR) body in India. Its mandate is to resolve tax disputes in respect of Indian Income-tax & Wealth Tax Laws between the two disputing parties, Income Tax Department on one side and litigating taxpayer on the other.