Taxation
Tax Tentacles – 2: How They Suffocate Us
Cumbersome forms, adding non-taxable items, modifying the computation and denying legitimate deductions by raising disputes, flawed appeals and revisions -- multiple tentacles squeeze the assesse. This is second part of a multi-part series adapted from Justice S Rangarajan Memorial Lecture in Bangalore delivered recently
 
The first tentacle takes the form of income tax returns, which require disclosure of all income on pain of penalty and prosecution for concealment. Full confession is expected because the department has no way of getting full information about sources of income. Even if they do, they still want the confession. Their advertisements say, “We know you bought a house and you will face penalty for not returning the income used for the purchase” (http://goo.gl/6MLTqP). The logo on the form states: ‘KOSH MULO DAND’, which appears to mean paying tax is punishment. These words are part of the original Sanskrit phrase as appearing in Kautiliya’s Arthshastra meaning: “revenue is the backbone of administration”.
 
Filling the form itself is a pain. The US income tax form 1040 says, 'Check this box if you are blind.' The form is so powerful that it will miraculously give you sight to check the box!
 
The next tentacle reaches out with the power to search and seize and to collect data about income. The power to search is a tool for gathering data but the processing of that data lead to unexpected results. 
 
I remember a case of a Hindu undivided family (HUF) of 10 brothers in a village in Orissa where the wives were found to be wearing jewelry of Rs1 lakh each. The Wealth Tax Officer concluded that they had concealed Rs10 lakh of wealth in a year and since he can reopen assessments for 10 years, the total wealth concealed was one crore and as, at the time, the penalty for concealment was equal to the wealth concealed, he imposed penalty of Rs1 crore apart from the tax and interest for delay. 
 
The Commissioner (Appeals) had himself cancelled it. In those days, the Appeal Commissioners were quite fair. However, the Wealth Tax officer appealed and we dismissed the appeal, as it was streedhan from their parents and did not belong to the HUF. 
 
In another case, nothing was found in the search but the income tax officer insisted that the assessee, a well respected doctor, should confess that he had concealed the interest of about Rs200, which had accrued on National Savings Certificate (NSC) that he thought was taxable only when the certificate matured, because the department cannot close a search case without finding some concealed income. 
 
Even when the income is returned, further tentacles surround the assessee while making assessments by adding non-taxable items, modifying the computation and denying legitimate deductions by raising disputes such as… 
 
the status of the assessee
whether a receipt is taxable income or non-taxable capital
whether the income has accrued though not received
whether an asset is properly valued
Whether income is concealed even though particulars are disclosed
and, of course, denial or delay of refunds.
  
The provision of appeals and revisions is only to maintain an error free administration. However, in the case of taxation, the remedies are worse than the disease. We originally had a departmental appeal and an independent appeal to the Tribunal, which was final on facts and a reference to the High Court on questions of law. The department was upset that errors were being corrected often by the independent Tribunal and so changed the reference to appeal and also restricted the powers of the Tribunal to give interim relief. The Supreme Court has just concluded hearing the case against setting up the National Tax Tribunal, which in my opinion actually corrupted the constitution. It will take years to decide the pending cases and even if the error is corrected, it may not be final.
 
 
Tomorrow: Part3- How Delay Undermines the System
 
(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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Sitharaman meets stakeholders on FDI in e-commerce

Sitharaman said she is also considering meetings with some state governments on the matter

 

Commerce Minister Nirmala Sitharaman on Thursday held consultations on foreign direct investment policy in e-commerce with stakeholders, including e-retailers Flipkart and Snapdeal and industry associations, especially whether FDI should be allowed in the business-to-consumer (B2C) category.
 
"It was the first meeting. We are not taking any position this way or that way from the ministry. We have heard everybody on whether they need or do not need FDI, and whether it will affect the level playing field," Sitharaman told reporters here.
 
"In fact, this is not going to be sufficient. I need more meetings with everyone, individual operators and associations," she added.
 
Sithraman said she is also considering meetings with some state governments on the matter.
 
"I may have meetings with state governments also to understand how they have taken a position because it is important for me to know in each of these cases what is the issue," she said.
 
India currently allows 100 percent FDI in business-to-business (B2B) e-commerce, but not in B2C companies selling directly to consumers.
 
Sitharaman said stakeholders raised issues related to taxation, definition and inclusion of e-commerce within the framework of the domestic trade policy.
 
Representatives from industry organisations CII, FICCI, Nasscom, the Confederation of All India Traders, and companies such as eBay, Snapdeal, Decathlon, H&M, and Ikea attended the meeting.
 
"CII is of the view that e-commerce in India is at relatively nascent stage and the market is yet to attain full maturity level," the industry chamber said in a statement here after the meeting.
 
"While CII is favourably inclined towards 100 percent FDI in B2C route, the sector should be given some time to come to a level where it can compete globally," it added.

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MMRDA spending Rs76 lakh a month on Mono Rail security
MMRDA paid Rs75.96 lakh to Maharashtra State Security Corp as charges for security at its seven stations, depots as well as the Mono Rails, reveals an RTI reply received by activist Anil Galgali
 
The Mumbai Metropolitan Region Development Authority (MMRDA) is spending about Rs76 lakh every month towards the security of Mono Rail, its seven stations and depots, reveals a reply received under the Right to Information (RTI) Act. There are average 14,282 commuters, who daily use Mono Rail services.
 
According to a reply received by RTI activist Anil Galgali, the MMRDA paid Rs75.96 lakh to Maharashtra State Security Corp as charges for security at its seven stations, depots as well as the Mono Rails. 
 
Galgali, in a letter to Maharashtra chief minister Devendra Fadnavis, requested for relaxation on the security expense collected by the government. "This will lighten the burden of MMRDA and in a way can make Mono Rail project a bit viable. It is a public transport now. It would be easier for the MMRDA if the government stops collecting these huge amounts per month just for providing security to stations and depots. I have also requested the CM in my letter to stop the overflow of people sent in by the Government for this specific purpose as security should be provided only as per the requirements," the RTI activist said.
 
In another query, the MMRDA said during February 2014 to March 2015, the Mono Rail was used by nearly 60 lakh commuters, generating revenues of Rs4.89 crore from ticket sales. One round trip costs MMRDA a sum of Rs3,131 per trip and not more than 131 trips are done daily between Chembur and Wadala Depot. The second portion of the remaining work on Mono Rail between Wadala Depot and Jacob Circle is 81% complete and will be ready by December 2015. 
 
MMRDA was the system administrator for the monorail project, while Larsen and Toubro (L&T) along with Malaysian Scomi Engineering BHD were awarded the contract to build and operate the Mono Rail until 2029.

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