The time taken to resolve tax disputes will soon be drastically reduced thanks to an ordinance promulgated by the government last week amending the National Tax Tribunal Act.
The ordinance was issued in accordance with a directive of the Supreme Court, which is hearing petitions against the setting up of NTT. Once it starts functioning, NTT will be capable of disposing appeals in six months to one year, unlike high courts which take seven to 15 years before deciding on a tax matter.
The backlog of cases before various courts has also affected early decisions on tax matters. In some cases, high courts are hearing appeals filed in 2000 and hearing references filed as far back as 1985. The Bombay High Court has a tax bench that sits only two days a week.
NTTs decisions are expected to affect tax arrears worth Rs 70,000 crore which are now locked up in litigation at various levels. These cases will now be decided by NTT. A similar amount is pending as indirect tax arrears at various appellate bodies.
Though the NTT Act was enacted in 2005, the Tribunal did not take off due to the series of cases filed in the high courts of various states and the Supreme Court, citing a number of inherent flaws in the Act. The Supreme Court recently gave direction to the Union government to amend certain provisions that triggered the disputes.
The amendments made by the ordinance are three-fold. First, no NTT member shall be transferred without the approval of the chairman of NTT. Second, introduction of a provision that allows only lawyers and chartered accountants to represent the tax-payer before NTT, thus removing the apprehension that unqualified professionals would get entry. Finally, ITAT members of five years or more are eligible to become members of NTT.
However, tax professionals feel that if the NTT has to work efficiently, it has to make changes in the rule limiting the tenure of an NTT member to five years. Successful professionals, including Income-Tax Appellate Tribunal (ITAT) members, would not opt to join the NTT as members because of the uncertainty in career after the five-year tenure.
For example, an ITAT member can remain with the ITAT till he retires. Such a person would not like to join NTT because of this uncertainty factor.
Eminent tax lawyer Soli Dastur stated that the limitation of tenure of a member in such bodies is a most dangerous instrument in the hands of a capricious law ministry. K Shivram of All India Federation of Tax Practitioners also echoed the same concern.
The NTTs principal bench will function from Delhi. It will have five benches, each consisting of a judicial member and a technical member for appeals against the orders of ITAT as well as indirect tax claims. The tribunal will be chaired either by a retired judge of the Supreme Court or a retired chief justice of the High Court.