Indian Central Board of Taxation Seeks to Reduce Tax Litigation

Posted on by

By Dezan Shira & Associates
Editor: Tracie Frost

India’s Central Board of Direct Taxes (CBDT) has issued a circular that changes the monetary limits under which the government can file for an appeal in cases before the appellate tribunal and the High Court.  The stated objective of the change is to reduce tax litigation.

In October 2014, the CBDT set monetary limits for the filing of appeals in income-tax matters.  The limits define when the government can appeal a decision that was decided in the taxpayer’s favor.  Previously, the government was not allowed to appeal cases wherein the tax effect did not exceed 400,000 rupees in the appellate tribunal, 1 million rupees in the High Courts, and 25 million rupees in the Supreme Court.

Related Link Icon-IBRELATED: India’s Withholding Tax for Non-residents

The new limits will preclude the government from appealing cases in which ax effects do not exceed 1 million rupees in the appellate tribunal, 2 million rupees in the High Courts, and 25 million rupees in the Supreme Court.  The revised limits have also been made applicable retrospectively to pending appeals.  Moreover, the circular specifically states that the government should not file appeals merely because the tax effect in a case exceeds the monetary limits, but that appeals should only be filed on the merits of the case.

For purposes of determining whether an appeal can be filed, the term “tax effect” means “the difference between the tax on the total income assessed and the tax that would have been chargeable” under the taxpayer’s  method of calculating total income.  “Tax effect” does not include interest unless the chargeability of interest itself is the subject of the dispute.  Further, the tax effect is calculated separately for every assessment year.  The circular does allow composite orders, however, under which an appeal can be filed for all assessment years, even if the tax effect is less than the monetary limits in any single year. 

The CBDT also permits appeals under the following four scenarios even if the tax effect is less than the monetary limits:

  1. Where the constitutional validity of a provision is challenged;
  2. Where the CBDT’s order has been held to be illegal;
  3. Where a revenue audit objection has been accepted by the CBDT; and
  4. Where the addition relates to undisclosed foreign assets or bank accounts.

Separately, the CBDT has instituted a focus group to consider withdrawal of appeals filed by the Department in cases involving tax effect above the monetary limit. If no question of law is involved, the issue is considered settled by the Department, or the appeal is no longer relevant in view of a subsequent amendment.

The CBDT expects this decision to reduce pending litigation filed by the Department by up to 50 percent and to provide relief to taxpayers facing long-standing litigation.

Professional Service_CB icons_2015RELATED: Accounting & Reporting Services from Dezan Shira & Associates


This is another in a recent series of circulars and notifications which are aimed at either reducing compliance burdens and litigation or bringing India’s regulations in line with international standards.  It is noteworthy that cases involving undisclosed foreign assets are exempted from the monetary limits, as this signals the government’s continued fight against so-called black money.  Additionally, it is important to note that these monetary limits apply only to income-tax cases.

About Us

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email or visit

Stay up to date with the latest business and investment trends in Asia by subscribing to our complimentary update service featuring news, commentary and regulatory insight.

Related Reading-IB

Cover 90 x 126

Managing Your Accounting and Bookkeeping in India
In this issue of India Briefing Magazine, we spotlight three issues that financial management teams for India should monitor. Firstly, we examine the new Indian Accounting Standards (Ind-AS) system, which is expected to be a boon for foreign companies in India. We then highlight common filing dates for most companies with operations in India, and lastly examine procedures and regulations for remitting profits from India.

Tax, Accounting, and Audit in India 2014-2015
Tax, Accounting, and Audit in India 2014-2015 offers a comprehensive overview of the major taxes foreign investors are likely to encounter when establishing or operating a business in India. This concise, detailed, yet pragmatic guide is ideal for CFOs, compliance officers and heads of accounting who need to be able to navigate the complex tax and accounting landscape in India in order to effectively manage and strategically plan their India-based operations.

An Introduction to India’s Audit Process
In this issue of India Briefing Magazine, we provide readers with an overview of India’s annual audit process and offer important tips for the smooth navigation of the country’s audit regulations and accounting standards. We begin by first explaining the two most common types of audit in India, statutory and internal audits, and then outline the standard steps and procedures an Indian auditor will follow in each.

Leave a Reply

Your email address will not be published. Required fields are marked *

Scroll to top