• Mutual Agreement Procedure  (MAP) is not an appeal pending and hence, will not be eligible for VSV settlement.
•  Mutual Agreement Procedure  (MAP) , however,  can also be availed, in cases where appeals are pending before CIT(A)/ ITAT. Hence, where appeals are pending as on 31 January 2020 (even though application is made before MAP  authorities), VSV could be availed for such matters.  
• In such cases, if settlement is done under VSV of the appeals pending,  Mutual Agreement Procedure  (MAP)  can be withdrawn.  It however needs to be clarified by CBDT, that tax credit for taxes paid in India will be available to the foreign entity based on the DTAA provisions.  

As per 245A, Taxpayer can approach Settlement Commission for any proceedings (viz.143(3), 147, 254, 263, 264 which may be pending before an Assessing Officer on the date on which an application is filed.  VSV scheme can be availed only where appeal are pending so it is not possible to cover proceedings before Settlement Commission. 

Yes can be filed.  Refer Q1 of FAQ dt 4 March 2020 (beneficial view should be taken)

If appeal filed before 31 January 2020 along with condonation and condonation is accepted before 31 January 2020

If condonation of delay is accepted before 31 Janaury 2020, then the same will be covered under the VSV scheme

If appeal filed before 31 January 2020 along with condonation and condonation is rejected before 31 January 2020

Since condonation of delay is rejbected before 31 Janaury 2020, then no appeal is pending as on 31 January 2020 and hence, the same will not be covered under the VSV scheme

If appeal filed before 31 January 2020 along with condonation and is pending 

If the appeal is pending and condonation is not disposed off, then reliance can be placed on the SC ruling in case of CIT v. Shatrusailya Digvijaysingh Jadeja (2005)(277 ITR 435(SC) rendered in the context of similar provisions of KVSS, 1998 states as under :

“…when a section contemplates pendency of an appeal, what is required for its application is that an appeal should be pending and in such a case there is no need to introduce the qualification that it should be valid or competent. Whether an appeal is valid or competent is a question entirely for the appellate Court before whom the appeal is filed to decide and this determination is possible only after the appeal is heard but there is nothing to prevent a party from filing an appeal which may ultimately be found to be incompetent, e.g., when it is held to be barred by limitation. From the mere fact that such an appeal is held to be unmaintainable on any ground whatsoever, it does not follow that there was no appeal pending before the Court”

Based on this ruling, appeal filed belatedly and if pending as on 31 January 2020 should be covered.  However, this needs to be clarified by the CBDT.

Actions to be taken by the taxpyer:- 

• In such cases, file declaration – If DA accepts, it is fine.  If DA doesn’t accept, file Writ before the HC (Anyway No tax to be paid) 

If appeal filed after 31 January 2020 with condonation 

Under Dispute Resolution Scheme 2016, specific clarification was introduced to cover such cases.

Circular 33 of 2016 (In context of Dispute Resolution Scheme 2016) 

“Question No.6: In a case the time period specified under section 249 of the Income-tax Act for filing of appeal expired on 29.2.2016. The assessee filed an appeal in this case on 5.4.2016 with a request to condone the delay in filing of appeal. The Commissioner (Appeals) condoned the delay in filing of the appeal. Is the Scheme available to the assessee in such a case?

Answer: In condonation cases, a declarant shall be eligible for the Scheme, if: (i) the time limit for filing of appeal under section 249 of the Income-tax Act, 1961 has got barred by limitation on or before 29.02.2016; (ii) the appeal and condonation application has been filed before Commissioner (Appeals) before 01.06.2016; and (iii) the delay in filing of such appeal is condoned by the Commissioner (Appeals) Hence, in the present case the Scheme is available to the assessee”

Hence, such appeal not pending as on 31 January 2020 may not be covered under VSV unless specifically clarified by the CBDT (since no pending appeal as on 31 January 2020).

(a)Where order u/s 263 has been passed by the CIT with specific directions  ?

Ans :It should be possible to avail VSV scheme for such order as ‘disputed tax’ can be determined.  There are many other situations stated in VSV or FAQ which are eligible to opt for VSV and for which workable manner of determination of disputed tax will be provided  For Eg: As per Q7 of the FAQ dt 4 March 2020, where assessment is set aside to Tax Authority for giving proper opportunity to the taxpayer or to carry out fresh examination with specific direction is covered and disputed tax shall be computed on the premise that such addition is made by Tax Authority – Here,  the appellant will be required to settle other issues, if any, which has not been set aside in assessment and in respect of which either appeal is pending or time to file appeal has not expired.  If such scenario is covered, then, 263 order with specific directions should be allowed to be settled.

b) CIT 263 order has been passed with general directions from CIT?Ans: In FAQ 7, it has been clarified that assessment set aside de-novo by CIT or appeallate authorities, cannot be settled under VSV.  Also, FAQ 3, it has been clarified that if AAR order has not determined income, than such matter cannot be settled under VSV.  Hence, 263 order passed with general direction (ie with direction to do de novo assessment) cannot be settled.   

c) CIT 263 order has been passed with general directions from CIT and the consequential AO order has been passed on 15 February 2020 (ie before filing the declaration) ?

Ans: 

• FAQ 7 allows relating back for the purposes of quantification ie where assessment is set aside with specific direction, disputed tax shall be computed on the premise that if such addition is to be repeated by Tax Authority.   
• Similar view is taken in FAQ 3 where AAR order has determined the total income of the appellant and AAR order is challenged before High Court, than such cases can be settled.  
• Accordingly, if ITAT appeal against the CIT 263 order is filed before 31 January 2020 and OGE is passed on 15 February 2020 (before filing the declaration), then the quantification should relate back and based on FAQ 7.  However, it should be clarified that such appeal can be elgible for settlement under VSV. 

Notice under section 263, is specifically not covered within definition of Appellant under section 2(1)(a) of the VSV, Act

Where the matter is decided by the Court as on 31 January 2020 and order is pronounced, the said matter is no longer pending before that Court.  However, time limit to file appeal before the higher appellate forum is pending and same will be considered as deemed appeal as on 31 Janaury 2020 [not applicable in case where the order is pronounced by SC in case of the assessee against which no appeal can be filed].  

For quantification, intention of the legislature view seems to be that disputed tax is to be computed after giving effect to appellate order passed.  (Refer ans to Question 7 above) 

There is ambiguity in the FAQ’s in respect of this aspect.  Intention of the legislature looks to be that if hearing is concluded before or after 31 January 2020 and the order is received after 31 January 2020 but before filing the declaration, then

• Since appeal is pending as on 31 January 2020; 
• Therefore, disputed tax is to be computed after giving effect to the appellate order passed post 31 Janaury 2020;

PCIT should inform all its officers to pass the OGE on immediate basis so that correct disputed tax can be computed by the DA.

If the issue is decided by the appellate forum in favour of the appellant for any other year and not reversed by Higher forum – then can settle that issue at 50%.  

Therefore we can expect some clarification on this issue from CBDT.  

Yes. Disputed tax to be computed based of draft assessment order and time limit to file objection with DRP is not expired should be mentioned in declaration.

There is no clarification available in amended Act/ FAQ.  

Our suggestions

• In such situation, flexibility may be given to the taxpayer to file single declaration for multiple assessment years so that demand and refund under VSV may be adjusted. 

• Further, where taxpayer has filed separate declaration for each assessment year, facility may be given for setting off amount payable under one declaration against refund due under another declaration such that net sum can be discharged. There is no reason to ask taxpayer to pay on one hand and grant refund on other hand.  

• Though, we understand that Department’s prima facie view is that netting off of refund against demand will not be allowed.  However, this should be reconsidered.