Scrapping of Income Tax Settlement Commission: Central Govt notifies Compensation to Officers for Premature Termination [Read Notification]

Income Tax Settlement Commission - Central Government - Compensation to Officers - Premature Termination - Taxscan

The Finance Ministry notified the Settlement Commission (Income-tax and Wealth-tax) (Recruitment and Conditions of Service of Chairman, Vice-Chairmen and Members) Amendment Rules, 2021 which seeks to amend the Settlement Commission (Income-tax and Wealth-tax) (Recruitment and Conditions of Service of Chairman, Vice-Chairmen and Members) Rules, 2015 with an aim to compensate the Chairman, Vice-Chairman and the Members for the premature termination of term of their office.

In the Settlement Commission (Income-tax and Wealth-tax) (Recruitment and Conditions of Service of Chairman, Vice-Chairmen and Members) Rules, 2015, in rule 7, after second proviso and before Note, the a Proviso shall be inserted namely, “Provided also that any person appointed as Chairman, Vice-Chairman or Member holding office as such immediately before the date to be notified by the Central Government in this behalf, shall on and from such date, cease to hold such office, and they shall be entitled to claim compensation not exceeding three months’ pay and allowances for the premature termination of term of their office.”

The income tax settlement commission, constituted in 1976 as per the recommendations of the Wanchoo Committee as an alternative dispute resolution scheme to reduce tax litigations and to allow the taxpayers to settle their dues through compromise without losing their time and efforts in Court proceedings. The Budget 2021 proposed to discontinue the commission with immediate effect as it appeared to the Government that the commission outlived its utility in the light of various amnesty schemes introduced in the past few years.   

An explanation to the Notification included that “The Settlement Commission (Income-tax and Wealth-tax) (Recruitment and Conditions of Service of Chairman, Vice-Chairmen and Members) Amendment Rules, 2021 is being given retrospective effect from the 1st February, 2021 in pursuance of clause 56 of Finance Bill, 2021 proposing to insert a proviso under section 245B of the Income-tax Act, 1961 to the effect that Settlement Commission shall cease to operate on or after the 1st February, 2021.”

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