The apex court docket on Could 4 dominated that 1000’s of show-cause notices issued by the income-tax division below an previous provision (Part 148) must be handled as those issued below the brand new modification (Part 148 A).
This has spooked a number of multinationals who at the moment are required to reply to the tax division within the coming weeks. Many concern the tax division might choose and select between the previous regulation and the brand new regulation round sure laws that might finally result in extra tax outgo, consultants say.
Tax consultants say that if these notices are handled as being issued below the brand new regulation, it might create issues round present tax structuring.
Tax consultants say that the previous income-tax rule had a separate interpretation of how jurisdictions outdoors India could possibly be used for holding entities.
“It must be seen if the taxpayers are in a worse-off scenario after this determination. If the notices issued are handled as issued below new regulation as previous regulation has a number of extra defences out there to taxpayers on jurisdiction. This might require multinationals to have a relook at their group degree tax provisioning on a direct foundation to this extent and plan rigorously for complying with these notices after evaluating all execs and cons,” mentioned Rahul Garg, managing accomplice of tax and regulatory consultants Asire Consulting.
The federal government had tweaked Part 148 of the IT Act. The part allowed tax officers to open previous assessments if that they had the rationale to consider that the corporate had paid decrease revenue tax.
The tax division, within the meantime, prolonged the previous regime (previous 148) citing Covid second wave and issued 1000’s of notices. About 90,000 writ petitions have been filed throughout India on this regard.
The problem was heard by a number of Excessive Courts, most of which dominated in favour of the taxpayers.
The dispute lastly reached the
Court docket which dominated, “The impugned Part 148 notices issued to the respective assessees which have been issued below unamended Part 148 of the IT Act, shall be deemed to have been issued below Part 148A of the IT Act as substituted by the Finance Act, 2021, and construed or handled to be show-cause notices when it comes to part 148A(b).
The court docket has directed the tax division to take additional motion inside 30 days primarily based on the details of the case. The businesses should reply to those notices inside two weeks thereafter.
Tax consultants say one of many revised timelines prescribed below the brand new regulation is ready to create problems for MNCs.