Taxes are the lifeblood of a country’s economic infrastructure, enabling the government to fund essential services, public goods, and sustainable development. Despite the overarching importance of taxation, it is important to bear in mind that the administration of taxes including the dispute resolution process need to balance revenue facilitation with principles of fairness and non-arbitrariness.
Tax litigation thus becomes a barometer for assessing the health of the tax administration system. The likelihood of tax disputes ending up in litigation has a significant impact on the ease of doing business, directly influencing the business environment in the country. When companies and firms face prolonged and complex tax disputes, it can create uncertainty and hinder their operations. The constant threat of litigation also deters potential investors and entrepreneurs. Lengthy legal battles also consume valuable resources, both in terms of time and money, diverting attention away from core business activities.
Preferred citation: DAKSH India (2024). DAKSH High Court Database: Tax Case dataset.[url]
The Indian tax system is widely perceived to be one of the most complex in the world. This regime includes taxes created as far back as 1860, with the oldest tax tribunal, the Income Tax Appellate Tribunal, created in 1941. The consolidation of many of these into a common GST regime in 2017 made large strides towards simplifying tax legislation, but litigation remains persistent.
Tax disputes remaining under litigation, directly impact government coffers, with each ongoing case rendering potential revenue stuck and inaccessible. In this Dashboard, we examine tax matters in the various high courts, their nature, typology, and time taken for resolution. In addition, we discuss opportunities for tax administration to be reformed, to reduce the burden on individual parties as well as the courts.
Tax disputes in India go through a multi-stage process before they reach courts. Depending on the nature of the tax or duty, any appeal against the directions of the original assessing officer is first heard by (i) a supervisory officer, typically at the Commissioner level, and then by (ii) a dedicated tribunal such as the Income Tax Appellate Tribunal (ITAT) or Customs, Excise and Sales Tax Tribunal (CESTAT).
Tribunals are quasi-judicial, with disputes heard by an accountant member as well as a judicial member. They primarily handle questions of fact relating to the assessment as well as questions of law i.e. appropriateness of classification, procedure followed, administrative irregularities or disregard of natural justice.
Further appeals involving questions of law account for the tax matters that ultimately reach the High Court level. Other tax-related matters that reach the High Court may include writ petitions relating to taxes and appeals involving GST (as the GST Appellate tribunals have not yet been set up; see DAKSH’s Coalition for the GST Appellate Tribunal here).
Tax legislations have gone through a huge change in recent years due to (i) abolition of some types of taxes and (ii) consolidation of others under GST. Moreover, with implementation of the Tribunal Reforms Act, 2021, disputes relating to customs duties may not be sent to their tribunal, but instead directly to the appropriate High Court.
Taxes in India are classified as Direct or Indirect taxes, based on how they are imposed and collected.
A number of indirect tax types present in our database have been subsumed under the GST regime and are no longer active for fresh matters. These include (but are not limited to):
Central Excise duties,