Companies & Sectors
Honda to replace air bag inflator in 11,381 vehicles
Automobile major Honda Cars India on Friday said it will carry-out preventive replacement of air bag inflators in its sports utility vehicle (SUV) CR-V and premium sedan Accord.
 
According to the company, it will carry-out preventive replacement of the passenger-side air bag inflator in 575 units of CR-V manufactured in 2004 and driver-side air bag inflator of 10,805 units of Accord manufactured during 2003-2007.
 
The company said this exercise is part of Honda’s global recall and safety improvement campaign concerning the air bag inflator in their car models. Additionally, the passenger-side air bag inflator in 1 unit of Civic of 2004 make will also be replaced. 
 
The company added that the replacement would be carried out free of cost at its dealerships across India from June 4 in a phased manner and the company will communicate with customers directly. 

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Tax Tentacles -3: How Delay, Litigations, TDS Undermine the System
While the litigation tentacle is very gripping, the TDS tentacle is long enough to freeze bank accounts of the deductor even though he is not a taxpayer and no amount is due from him. This is third part of a multi-part series
 
Let me give an example of how the delay undermines the system. Clubs are considered to be mutual societies, which cannot make income from their own members. However, when they deposit their surplus funds in the bank, the question is whether the interest is mutual income not liable to tax. Though it is not derived directly from the members, the Supreme Court held 5 February 1998 in the Cawnpore Club case that parking surplus funds in the bank is also a mutual activity and that such interest cannot be taxed.
 
However, the income tax officer refused to follow it and taxed the interest in the Secunderabad Club case and surprisingly it was upheld by the AP High Court. The appeal is pending in the Supreme Court. While so, the Supreme Court has held otherwise in the Bangalore Club case on 14 January 2013 without reference to the earlier case. 
 
If only the case of the Secunderabad Club had been taken up earlier, there would have been no problem, but now they have to reconcile two judgments of the Supreme Court to get relief, which other clubs enjoyed till now. Similarly, the prohibition against filing a suit by the real owner against the benamidar was originally held to be retrospective but later held to be prospective. Many litigants whose cases were heard in between lost their cases. 
 
The Income Tax department is yet to become a learning organisation. The department should have told the officers in the field about the decision of the Supreme Court in Cawnpore Club case and instructed them to exempt interest in all club cases, to avoid such repeated litigation. Even though the officers have access to decisions and also whether they have been accepted, the information is not shared with the taxpayers and so litigation is not curbed. The litigation tentacle is very gripping. 
 
Besides, there are also administrative pressures. In a letter dated 7 February 2012 the chairman of the Central Board of Direct Taxes (CBDT) told senior officials that their career prospects would depend on their success in meeting targets for tax collection, emphasising the government’s desperation to raise revenues to plug the rising fiscal deficit. He sent out a clear message to the top 100 officials that tax revenue targets are ‘non-negotiable’.  In one of the recent tax terror cases, a transfer-pricing related issue involving Bharti Airtel, the income-tax officer disallowed a sum of Rs57,39,60,05,089 (to make it simple for you—it means Rs5,739 crore!). This was done, despite the fact that it was obvious that there was no justification for such a disallowance. These disruptions may even kill the goose that lays the golden egg.
 

Mauling the Messengers

The real sting of the present system is the deduction of tax at source. This is a job of the department to collect tax, which is quietly outsourced to the employers and others who need to make some payment. They have to deduct the tax due on the payment, file a return with the department and give a certificate to the payee. And unlike the income tax officer, they can be punished for not doing that work! ( section 271C) 
 
The Planning Commission has estimated the cost of complying with this requirement is about 45% of the amount paid out. The Comptroller and Auditor General (CAG) has pointed out that in nearly 50% of the cases, returns have not been filed by the deductors and there is also default in remitting the tax deducted.
 
In para 2.14.3 of the Report No8 of 2007, it is stated that the amount refunded out of tax deducted at source (TDS) was about 15% indicating that tax was deducted even where it was not required. A more poignant situation is when tax is deducted, though the person has no taxable income. This tentacle is long enough to freeze the bank accounts of the deductor even though he is not the taxpayer and no amount is due from him.
 

Present Approaches to Change

Various committees have given reports about simplifying the system. But almost all of them were suggesting only ad hoc changes, very often, to get over judicial decisions which were considered to be road blocks. 
 
Direct Tax Code was proposed as a substitute but it is only a restatement of the Income Tax Act with departmental bias.
 
Shome Committee Report has recently recommended some changes and surprisingly could not get the courage to recommend the repeal of a needless retrospective legislation. All the recommendations are for fine-
tuning the present sections of the Act.  
 
Sometimes public comment is invited. But the comment has to be on the proposals and no fresh ideas are welcomed. The recommendations that have been accepted do not deal with alternate methods of levy and collection of tax.  In addition, data available with the department is not shared. 
 
In USA, Uncle Fed's Tax Board makes all their reports available for public review and concern. In the reports, you will also see the IRS' response to the problems that the Government Accountability Office (GAO) has found. Over time, you will also be able to monitor how well the IRS has actually made improvements to correct these problems and how long it takes them to do so. 
 
Action Point 1 of the Vision statement of the I-T department is, “Set up a research unit having a multi-disciplinary team coordinating efforts on tax research as an ongoing program, after ascertaining all the research requirements of I-T Dept.” Nevertheless, none of the data collected by them is put in the public domain. The CAG report No. 8 of 2007 gives the number of returns processed but we do not know how many were by salaried employees and how many were government servants or how many were self-employed. We do not know how many were high net worth individuals (HNIs) and what their profile was. 
 

Vision for the Future

The perspective of the Government is not the same as the perception of the citizen. The vision of the Income Tax Department is stated to be a partner in the nation building process through progressive tax policy, efficient and effective tax administration and improved voluntary compliance. Government thus looks at it as resource mobilisation. But the tax administration looks at it as tax collection process from unwilling taxpayers. 
 
Oliver Wendell Holmes, Jr., US Supreme Court Justice said, "Taxes are what we pay for civilized society.”  However, most citizens look at it as extortion or getting robbed of their hard-earned income. 
 
Robert A Heinlein observed, “The power to tax is the power to destroy.” 
 
John Marshall said “Government! Three fourths parasitic and the other fourth stupid fumbling.” 
 
Terry Pratchett declared in Night Watch “Taxation is just a sophisticated way of demanding money with menaces.” 
 
Murray N. Rothbard: “Taxation is theft, purely and simply even though it is theft on a grand and colossal scale which no acknowledged criminals could hope to match. It is a compulsory seizure of the property of the State’s inhabitants, or subjects.” 
 
This dissonance in the perception of taxation is the cause of friction in the administration of the tax regime. If we can change the mindset to be harmonious and identical, there will be clearer focus and easier administration. The way to do it is to understand that taxation is only a means to channelise the private funds of citizens for public purposes. This is not a new concept and is found in our ancient scriptures. "It was only for the good of his subjects that he collected taxes from them, just as the Sun draws moisture from the Earth to give it back a thousand fold" Kalidasa in Raghuvamsam eulogizing King Dilipa. Kautilya also recommended growth-oriented fiscal policy along with a provision of a safety net. Interestingly, another Rangarajan has motivated research on this aspect.
 
(This is third part of a multi-part series on the vexing Indian tax system and the path to genuine reforms, adapted from Justice S Rangarajan Memorial Lecture in Bangalore delivered recently)
 
On Monday: Part4 - Redefining What to Tax
 
You may also want to read…
 
 
 (Justice TNC Rangarajan is a former judge of Madras and Andhra Pradesh High Courts. Earlier, for more than 20 years, he was a Judicial Member of Income Tax Appellate Tribunal.)
 

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'Bombay Velvet' - Rich in texture, synthetic in feel
The narration rolls off sometime in 1949, two years after India became independent, when little orphan Balraj lands up at the docks of Bombay. Soon he befriends Chiman, a petty thief and is sucked into the underbelly of the city
 
Film: "Bombay Velvet"; Cast: Ranbir Kapoor, Anushka Sharma, Karan Johar, Satyadeep Mishra, Kay Kay Menon, Vivaan Shah and Siddhartha Basu; Director: Anurag Kashyap; Rating: ***
 
Presented in a dark, moody and stylish manner, "Bombay Velvet" is a complex tale of city politics, ambition, greed and love. But on the face of it, it is a period story of a gangster -- in sin-city Bombay -- who wants to be "a big shot" someday.
 
The narration rolls off sometime in 1949, two years after India became independent, when little orphan Balraj lands up at the docks of Bombay. Soon he befriends Chiman, a petty thief and is sucked into the underbelly of the city.
 
Over a period of time, Balraj becomes street-smart. He soon graduates to being a street boxer who also indulges in petty crime. Starved of love and a sense of belonging, his only aim in life is to make it big.
 
Balraj's chance encounter with the dubious media baron and entrepreneur Kaizad Khambatta has him baptised as "Johnny". Seeing Johnny as an enthusiastic opportunist, Khambatta offers him an opening of a lifetime -- to manage his restaurant-cum-pub, Bombay Velvet, in exchange of nefarious favours. An ever-obliging Johnny Balraj accepts the offer.
 
The plot gets complicated when Rosie, once a choir singer and now a wannabe crooner, is planted in Bombay Velvet by an influential editor, Jimmy Mistry, to thwart Khambatta's business interests.
 
Romance brews. Egos clash. Greed and aspirations take centre stage in the backdrop of city politics.
 
With fine characteristics borrowed from the Theatre of the Absurd, Anurag Kashyap blends two genres to create an unexpected noir film.
 
For the uninitiated, the Absurd genre, typically represents human existence as nonsensical and often chaotic. Absurdist works rarely follow a clear plot, and what actions occur, serve only to heighten the sense that characters are mere victims of arbitrary forces beyond their control. Dialogues are often redundant. The setting and passage of time within the tale is unclear and characters struggle to understand their world.
 
Here too the screenplay is complex and convoluted. With nothing much happening in terms of the story, the pace torturously drags in the first half, but picks up momentum in the latter part of the film. The only thing that keeps you hooked is the brilliant production quality and the performances of the cast.
 
Ranbir Kapoor with his snazzy hairstyle and charming persona effortlessly gets into the skin of Johnny Balraj. Similarly, Anushka Sharma essays the part of Rosie Noronha with natural ease. Together, they make a wonderful pair. Unfortunately, the script only skims through their romance and hence you don't feel strongly about them.
 
Karan Johar, making his acting debut in this film as the shady Kaizad Khambatta, is good. He gives a fairly composed and restrained performance but, in the overall scheme of things, he is never intimidating.
 
The few characters who shine are Satyadeep Mishra as Chiman, who plays Johnny Balraj's friend and accomplice; Manish Chaudhary as Jimmy Mistry, the Editor, and Siddhartha Basu as Romi Patel, a shrewd politician.
 
Kay Kay Menon, as the ambiguous, investigating police officer, and Vivaan Shah, as Johnny's driver, are wasted.
 
What peps these characters in this period saga are the costumes and their hairstyles. These are so reminiscent of the time and help in transporting the audience to that era.
 
Visually, with sepia tone frames and minute detailing of the sets, the era is well-captured. The streets, the tram lines, the over-crowded chawls, the telephone instruments and the dock yard transports you to Bombay, which is now lost to modernisation.
 
The background score along with the music matches the tempo of the narration, but with most of the songs having the same style and beat, the overall effect is monotonous and boring.
 
By and large, "Bombay Velvet" excels in its genre, but fails to leave an impact.

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