Analysis, Income Tax

The Legal Issue and Timeline Nexus

If you are involved in a litigation, we believe, knowing the disposal duration of similar case will be fairly important to you.

Duration depends upon factors such as the number of hearings, clarity on a point of law, the parties involved in a case, the relative importance given by the tribunal to a case etc. One variable that links all these factors is the legal issue involved, as it determines the level of scrutiny required to decide a dispute. A more accurate prediction of the time span of a case can be made if the analysis is made after clustering the data around specific legal issues.

What are legal issues? Legal issues are questions pertaining to a law that a court must answer in order to determine the outcome of claims made by rival parties.

Legal Issues around Deductions

To test our hypothesis, we looked at one very litigated topic in the Income Tax Appellate Tribunal (ITAT), Mumbai forum — deductions. Income Tax laws cover more than 400 topics, and many topics overlap with each other. Deduction cases constitute around 10% of the total cases disposed by ITAT Mumbai. Chapter VI-A of the Income Tax Act lists the deductions that can be claimed by an assessee. The three most litigated provisions under this topic are:

  • Section 80HHC – Deductions in respect of profits retained for export business with 800 cases
  • Section 80IA – Deductions from profits and gains in respect of enterprises engaged in infrastructure development with 572 cases
  • Section 80IB – Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings with 1459 cases.

Average Disposal Duration for Deductions 

Screen Shot 2017-11-29 at 4.04.08 PM

As shown in the graph, the average duration for disposal for sections 80IA and 80HHC are higher than the ITAT average. Only section 80IB disposal durations are in line.  The average duration of disposal, though, does not tell the full story about the case disposal trend of extreme cases.


To give a clearer picture, let’s look at the distribution plot. The trend for disposal of cases under Section 80IA and Section 80IB is almost identical for the first 50%, after which cases involving Section 80IA tend to take more time.

The statistics for Section 80HHC are concerning. Even after 6 years of filing of a dispute, only 80% of the cases are resolved. 80HHC was enacted to incentivize exports from India and accordingly exporters are granted deductions under this section to reduce their taxable profits. Excessive time required to dispose of a case is defeating this purpose.

Read our article on: Speed Check of ITAT Forums

What’s your plan of action?

Till the time your dispute related to the deductions is resolved, you will not be allowed to claim deductions on the transaction or similar transactions for subsequent financial years as well.

As you see, knowing the disposal duration trend for a legal issue can help you be more informed and strategise a plan of action if necessary.

And from the point of view of the state, such data analysis will be helpful to check if a corrective action is necessary.

(Written by Anuj Sharma, Product Counsel and Rutuja Udyawar, VP – Data Analytics @ Riverus)

2 thoughts on “The Legal Issue and Timeline Nexus

Share your thoughts using the comment section below

%d bloggers like this: