Positive growth and steady expansion plans
We had written about Fairfield Atlas Ltd...
Besides hiking the income tax exemption to Rs3 lakh from Rs1.8 lakh at present, the Standing Committee on Finance also suggested that 10% tax be levied on taxable income between Rs3-Rs10 lakh, 20% between Rs10-Rs20 lakh and 30% over Rs20 lakh
New Delhi: Ahead of the Budget, a parliamentary panel that scrutinised the Direct Taxes Code (DTC) Bill has suggested that income tax exemption limit be raised to Rs3 lakh per annum, and the investment limit for tax savings schemes be hiked to Rs3.20 lakh, reports PTI.
In its report, which was submitted to the Lok Sabha speaker Meira Kumar today, the Standing Committee on Finance suggested that the wealth tax limit be pegged at Rs5 crore, while the Securities Transaction Tax (STT) be abolished.
As regards the corporate tax, the committee, which is headed by senior BJP leader and former finance minister Yashwant Sinha, recommended that the rate be retained at 30%.
The report will pave the way for debate and passage of the DTC Bill, which seeks to replace the Income Tax Act, 1961, by Parliament.
Besides hiking the income tax exemption to Rs3 lakh from Rs1.8 lakh at present, the Standing Committee also suggested that 10% tax be levied on taxable income between Rs3-Rs10 lakh, 20% between Rs10-Rs20 lakh and 30% over Rs20 lakh.
At present, 10% tax is levied on income between Rs1.8-Rs5 lakh, 20% on income between Rs 5-Rs8 lakh and 30% above Rs8 lakh.
The DTC has proposed income tax exemption limit at Rs2 lakh, 10% between Rs 2-Rs5 lakh, 20% Rs5-Rs10 lakh and 30% above Rs10 lakh.
With regard to tax savings scheme, the panel has proposed to raise the total tax exemptions limit under various schemes to Rs3.2 lakh from existing Rs1.8 lakh and Rs2 lakh suggested by the DTC.
With regard to the wealth tax, the committee suggested that it should be levied only if the value of specified asset exceeds Rs5 crore as against Rs30 lakh currently and Rs1 crore suggested by the proposed DTC Bill.
As regards the rate, it said, the wealth tax should be charged at 0.5% on assets between Rs5-Rs20 crore, 0.7% on assets between Rs20-Rs50 crore and 1% above Rs50 crore. The wealth tax rate now is 1%.
The DTC Bill, which seeks to modernise the direct tax structure in the country, was referred to the Parliamentary Committee in August 2010.
The government, pending approval of the DTC Bill by Parliament, is likely to introduce some measures concerning taxes in the forthcoming Budget itself to be presented by finance minister Pranab Mukherjee in the Lok Sabha on 16th March.
The Budget Session of Parliament will begin on 12th March with president Pratibha Patil addressing the joint sitting of members of the Lok Sabha and the Rajya Sabha.
While 'Team Anna' member, Prashant Bhushan has launched a scathing criticism of the Vodafone verdict saying that India will be seen as a ‘banana republic’ where foreign companies can loot our resources, senior advocate Arvind Datar says in this case the demand was for capital gains tax which never arose in the country
While the Supreme Court has given its verdict in the Vodafone tax case, the issue of taxation, tax-avoidance and capital gains tax is still being discussed as a hot topic. Two senior lawyers have come out with different opinions on the verdict. Strengthening the Union government in its fight in the Vodafone tax verdict, ‘Team Anna’ member and Supreme Court advocate Prashant Bhushan has said that, “Our courts must send a clear signal that India is not a banana republic where foreign companies can be invited to loot our resources and even avoid paying taxes on their windfall gains from the sale of those resources.” On the other hand, Arvind P Datar, a senior advocate from Madras High Court, said, “In the Vodafone case the demand was for capital gains tax which never arose in India. Once the hollowness of the department’s claim was exposed, the absence of any liability became clear. The courts merely interpret the law and if a transaction is not liable to Indian income tax, one must graciously accept the result.”
In an article written in The Hindu (http://www.thehindu.com/opinion/lead/article2920912.ece ), Mr Bhushan had said, “Despite the fact that the entire object and purpose of the transaction between Hutch and Vodafone was to transfer the shares, assets and control of the Indian telecom company to Vodafone, the Supreme Court declared in January 2012 that the transaction has nothing to do with the transfer of any asset in India!”
Mr Datar, in a separate article written in the same newspaper (http://www.thehindu.com/opinion/op-ed/article2951103.ece ), said, “The demand for tax in the Vodafone case was a result of failing to understand the difference between the sale of shares in a company and the sale of assets of that company. Vodafone was the successful buyer of the share of the Cayman Island company for $11 billion. Consequently, by purchasing one share of the Cayman Island company, Vodafone came to own 51% of share capital of Hutchison Essar (HEL). The transfer of shares of one non-resident company (Hutchison) to another non-resident company (Vodafone) did not result in the transfer of any asset of HEL in India. All the telecom licences and assets continued to belong to HEL or its subsidiaries.”
“A large part of the income of the ‘Big 5' accountancy and consultancy firms derives from tax avoidance schemes which flourish in the name of tax planning. Their legality has agitated courts in India and abroad for a long time,” Mr Bhushan said.
He said, the Vodafone case is in the lineage of the Mauritius case in as much as both encourage tax avoidance devices ostensibly to attract foreign investment. “The 2G judgment of the Supreme Court cancelling 122 telecom licences granted four years earlier, in sharp contrast, enforces the constitutional principle of equality and non-arbitrariness. The proponents of FDI are groaning that this will stem the flow of investment. Honest foreign companies should not be deterred by this judgment, which strikes a blow against crony capitalism. But even if FDI becomes a casualty in the enforcement of the rule of law, so be it,” he added.
However, according to Mr Datar, if there is a policy decision to permit tax exemption for investments through Mauritius, one cannot blame the courts for any potential loss of revenue. “The government is fully conscious of the so-called loss of direct tax revenue but these incentives are essential to foreign direct investments. The huge growth in the telecom and other sectors has been substantially done through the Mauritius route. One cannot forget the enormous employment generated by FDI and the substantial increase in excise duty, sales tax and other duties and cesses. To merely harp on loss of income tax is not correct,” he said.
According to Mr Bhushan, in the Vodafone case, the Supreme Court has again made a wrong call on tax avoidance, setting a precedent that jeopardises thousands of crores of potential revenue for the exchequer. Mr Datar, however, feels that the courts merely interpret the law and if a transaction is not liable to Indian income tax, one must graciously accept the result.
Replying to Mr Datar’s article, the ‘Team Anna’ member said, “Tax avoidance devices have been honed to a fine art by clever lawyers and consultants advising such corporations. Unfortunately, in the Vodafone and the Mauritius cases, the court has winked at them instead of frowning upon and frustrating them as mandated by the binding judgment in McDowell.”