When one scans the morning papers one often reads about government officials acting high-handedly, irrationally and with blatant disregard for public interest. It was therefore heartening to note that the Attorney General of India had advised the government not to appeal against the decision of the Bombay High Court in Vodafone’s case. It is learnt that the CBDT chairman is of the view that the decision should be accepted. This is exactly the manner in which government officials holding high positions are expected to act. They must advise the government based on their expert knowledge of the subject and not tender that advice, which those who seek it want to hear.
When Mr. Modi assumed power at the end of May, his promise to the people was fair and equitable laws. In fact he has stated on a number of occasions that while new laws in the interest of the citizen needed to be enacted, several others which had clearly outlived their utility, and were causing unnecessary bottlenecks in the development process, needed to be annulled.
More than the complex and cumbersome laws, it is the irrational interpretation and implementation by overzealous tax officials that causes harassment to law abiding and diligent citizens. Indiscriminate additions in transfer pricing assessments is one such area. While undoubtedly, legislation in this regard was required as a large number of multinationals were shifting profits outside the country of source that is India. The object of transfer pricing legislation is to ensure that India got its fair share of tax. Unfortunately, the provisions are being treated as a revenue gathering measure with extreme interpretations and high-pitched assessments. This has created a great deal of uncertainty in the minds of the foreign investors. In fact, many transfer pricing assessments have virtually turned into tax terrorism. If the government does heed to the advice of its Attorney General, and accepts the decision of the Bombay High Court in the Vodafone case, then it will be a welcome step indeed.
While one must ensure that the unscrupulous do not get away, there needs to be a change in the mindset of officials that often tends to treat a taxpayer as a criminal. What is the need of the hour is fair laws, total transparency in legislating them, and administration of the enacted laws with a human face. A citizen would not mind paying a little higher tax if he were to be treated fairly. Those who interpret the law equitably must be encouraged. Whenever possible uncertainty must be removed. Safe harbour rules are a step in the right direction. Those, however. need to be realistic.
In the area of direct taxes, there are some provisions which treat a taxpayer unfairly. One set of them is relating to tax deduction at source. A majority of deductors discharge the obligation cast on them to deduct taxes diligently. In fact, the collection of taxes is the responsibility of the sovereign, which has been passed on to tax payers. Deduction of tax is therefore a service for which a person receives no payment. In such a situation, justice demands that as long a person acts bona fide, and discharges his obligation based on an honest interpretation of law, he must not be penalised. Similarly, in regard to the procedures for filing of statements, they must be streamlined and the processes be made more user-friendly. If the efficient discharge of this obligation can be appreciated in some mode that would be even better. So much for the deductor. As regards the recipient of income, once he establishes the fact that such tax has been withheld, then there must be a mechanism where after a due process of verification he is given credit for the same without him having to depend on the deductors filing a statement and completing all the processes. This is more so when the deductor is the government or a government undertaking. There are several instances where government departments have deducted tax but have not filed the statements. No action is taken in such cases.
Another area of grievance is adherence to timelines and efficient dispensation of justice in the tax field. While a taxpayer is required to comply with all the deadlines, in many cases there is not much of an obligation to act expeditiously on the tax administrator. While the tax payer is penalised for not acting within the time prescribed, there is no such penalty for the administrator. Whatever limitations and timelines are prescribed in the statute are for the lower end of the tax administration hierarchy. For instance, there is absolutely no time limit in which the first appellate authority needs to dispose of an appeal. There is also no timeline for disposal of the second appeal. There is no time line for disposing application u/s. 264. There may be administrative problems for which the citizen is not responsible. In this situation the hapless taxpayer is put to great hardship. Even when grievances are redressed the redress must be in substance and not in form. We often find orders passed in a cavalier manner so that the rounds of litigation increase. Each authority blames the lower one. Significant change in laws and procedures is necessary to achieve speedy dispensation of justice.
There are great expectations from the new government. At the time the Finance (No. 2) Bill, 2014 was introduced, the new Finance Minister had hardly any time to fulfil what was promised. The budget to be presented in February 2015 provides a great opportunity to this government to establish that it means business. It is time that the broom which has been thrown away by one political party in the capital is caught hold of by the Prime Minister and his men and all the cobwebs in the tax administration are cleaned. What citizens want is lesser laws but more justice.
The year 2014 is coming to an end. It has been the year in which change has occurred, and expectations are rising. One hopes that the year 2015 will see some of the dreams fulfilled.
