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Analysis of three important judgements (November 2011 to May 2012)

Shri. Anant Pai

Analysis of three important judgements (November 2011 to May 2012)

CA Anant N. Pai

No practitioner can afford to be unaware of latest judgements & whether experts view the judgement as being right or wrong. Towards that end, the author has agreed to take time out of his busy schedule to make an analysis of landmark judgements every quarter. In this part, the author has identified three landmark judgements analyzed them with a critical eye and identified their strengths & shortcomings.

In the past six months, several decisions of substantial importance to the tax payers have emerged. The Supreme Court decisions in the Vodafone case and also in the section 80-HHC issues are examples of the same. Since these decisions have been widely discussed, they have not been considered in this article to avoid duplication. Apart from these decisions, several decisions of the High Court and the Tribunals on issues of taxation of royalty etc have been nullified by the Government by resorting to retrospective amendments in the recent Finance Bill. These have also not been discussed as their value as legal precedents for the future would be doubtful after these retrospective amendments. The decisions selected in this article are only those which the author felt have analytical value to the readers.

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The Law Of Tax Recovery: Recent Important Case Laws

Percy Chhapgar & Ketan Ved

The Law Of Tax Recovery: Recent Important Case Laws

P.B. Chhapgar, K.K. Ved and K.J. Patel

The authors have carefully analyzed all the recent landmark judgements on the law of tax recovery and identified their core points. The authors have also given invaluable advice on the points that an assessee must emphasize in the stay application so that his case falls within the ratio of the case laws and he can get a complete stay on recovery of the demand

All tax payers and to a large extent their advisors too, generally face anxiety and stress more so in the months of January to March on account of the recovery spree that the tax department gets into.

The department generally goes overboard and tries to collect even demands which are incorrectly raised and / or can easily be rectified. This is inspite of there being specific guidelines laid down by the CBDT (in Circular No. 1914) or the guidelines laid down by various High Courts/Tribunal decisions on the subject. This year, the position was compounded by a communication dated 07 February 2012 issued by the Chairman of the CBDT to all CCITs, DGITs, CITs and DIT(IT)s inter-alia linking revenue collections to the performance parameters of the tax officers and also giving importance to the same while considering future placements.

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Why Vodafone Retrospective Law Is Not Disrespect To Supreme Court: FM

Shri. Pranab Mukherjee

Why Vodafone Retrospective Law Is Not Disrespect To Supreme Court: FM

Editorial Staff

Finance Minister Pranab Mukherjee delivered a speech yesterday in the Rajya Sabha in which he cleared the air on the retrospective amendments to nullify the verdict of the Supreme Court in the Vodafone case. The Government was not being disrespectful or confrontational with the Supreme Court, he said & added that if the Government had not taken the proactive stand, the consequences would have been draconian for the Country

The noteworthy aspect of Pranab Mukherjee’s speech in the Rajya Sabha yesterday was that, inspite of the huge groundswell of domestic and international opinion against the proposed retrospective amendments seeking to nullify the verdict of the Supreme Court, he was not at all apologetic. Instead, he looked the members of the opposition in the face and had an eyeball to eyeball confrontation with them, forcing them to blink and look away.

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Dear Pranabda, Save India’s Honour & Withdraw GAAR & Vodafone Law

Shri. Bibek Debroy

Dear Pranabda, Save India’s Honour & Withdraw GAAR & Vodafone Law

Editorial Staff

Noted economist Bibek Debroy argues that GAAR and the Vodafone retrospective amendments send a “perverse signal” and are a “terrible” idea. He says the proposals create great uncertainty, subjectivity and non-transparency which does not auger well for India as an investment destination. He urges the Finance Minister to admit his mistake and do a honourable strategic retreat before it is too late

Close on the heels of eminent senior advocate Harish Salve‘s passionate attack on the Vodafone retrospective amendments and General Anti-Avoidance Rules (GAAR), noted economist Bibek Debroy has also torn into the Government’s proposal to nullify the Vodafone verdict and implement GAAR.

In a short but succinct article, Bibek Debroy gives persuasive reasons for his suggestion. With regard to GAAR, Debroy points out that the time is not opportune for GAAR. There is already a severe dent in investor confidence owing to the state of the economy and the adverse balance of payments and GAAR will create great uncertainty, subjectivity and non-transparency.

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Why We Couldn’t Have Let Vodafone Get Away Without Paying Taxes: FM

Shri. Pranab Mukherjee

Why We Couldn’t Have Let Vodafone Get Away Without Paying Taxes: FM

Editorial Staff

Finance Minister Pranab Mukherjee delivered a fiery speech in Parliament yesterday in which he explained the rationale behind the Government’s resolve to tax Vodafone despite the Supreme Court’s verdict. He made out a strong case on why the Supreme Court’s verdict was against the rule of law & argued that if the UK could enact a 21 year retrospective law, India was not an “inferior” Country to be not entitled to do the same

Excerpts from the speech delivered by Shri. Pranab Mukherjee, Finance Minister, on 8.5.2012 in the Lok Sabha, during the debate on the Finance Bill 2012

On the Report of Standing Committee on Direct Tax Code Bill 2010

I thank, once again, Chairman and members of the Standing Committee on Finance for the excellent Report they have given on DTC. But I admit my own shortcomings that I could not fully implement it because I could not fully study it. I knew the proposals but to know the basic proposals and to study, understand and appreciate are different. Perhaps my intelligence level is low, that is why, I require some time to study and thereafter to firm up my view. Somebody’s IQ is may be much higher than me but my IQ is little less perhaps and that is why I wanted to read it thoroughly. It is an excellent Report. I have gone through some pages. It is an excellent Report and I am giving you an assurance that if you cooperate, we will get it done; get it passed in the Monsoon Session; and thereafter we can implement it. I have provided some of these provisions. A few of these provisions are already in the Finance Bill of this year.

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Why the Vodafone Retrospective Law Will Ruin India: Harish Salve

Shri. Harish Salve

Why the Vodafone Retrospective Law Will Ruin India: Harish Salve

Editorial Staff

Eminent Senior Advocate Harish Salve, the principal architect behind Vodafone’s spectacular success in the Supreme Court, has sent out a powerful emotive appeal that the retrospective amendments proposed in the Finance Bill 2012 to nullify the judgement of the Supreme Court and several other verdicts will malign India’s image in the minds of its citizens and foreign investors.

Harish Salve was addressing an august gathering of top business persons and high-level decision makers at a meeting organized by IMC a few days ago.

Harish Salve said that a country would prosper only when its economic and political institutions – the institutions that regulate and write economic policy – were transparent and stable and it did not matter what political system produced this. He cited the example of China which, though an autocracy, was able to attract large foreign investment because its political and economic institutions were stable.

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Dear Finance Minister, Will You Listen To Nani Palkhivala Before It is Too Late?

Shri. N. A. Palkhivala

The Maddening Instability of Income-tax Law

Late Nani A. Palkhivala, Senior Advocate

In 1991, Nani Palkhivala called the Income-tax Act “a national disgrace” because of its “maddening instability“. He expressed anguish at the “pathological change mania” that had gripped the Finance Ministry which caused it to make repeated and mindless amendments to the Law. He also expressed disappointment with the Indian public who endured injustice and unfairness with “feudalistic servility” and “fatalistic resignation“. 20 years later and in the wake of the storm that the proposed retrospective amendments in the Finance Bill 2012 have caused, it is finally time for the Government and the Nation to pay attention to what he was saying.

On 25th January 1991 the Income-tax Appellate Tribunal completed fifty years of its existence. On its Golden Jubilee it is but fair to record that it has won golden opinions on all sides throughout the half a century that it has functioned. There is no doubt that over this long period, the Tribunal has been manned by some very able individuals. Quite a few of them were fit to adorn any High Court Bench. No other Tribunal in India his won such well-deserved popularity and confidence of the public as the Income-tax Appellate Tribunal.

Administrative justice demands compromise. There is no pre-determined solution to the problem of tempering power with justice. The Tribunal has rightly earned the reputation of tempering judicial power with justice. It has evolved a cheap, quick and informal procedure for doing justice as between the State and the citizen, to the great satisfaction of the litigating public. In other words, it has acted as a Court of law in everything but name, while avoiding the regular process of civil law which is too cumbersome, technical and expensive.

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Why The Retrospective Amendments in Finance Bill 2012 May Not Be Valid

Shri. K. C. Singhal

Why The Retrospective Amendments in Finance Bill 2012 May Not Be Valid

Shri. K. C. Singhal, Advocate, VP, ITAT (Retd)

The author, a former Vice-President of the Tribunal & now a practicing advocate, explains why the retrospective amendments proposed in the Finance Bill 2012 may not meet the test of law. He also points out that retrospective amendments to reverse settled principles of law result in enormous harassment for the tax payer and send out an adverse message to citizens & foreign investors that the India does not play fair

A bare look at the Finance Bill reveals that various amendments are proposed with retrospective effect from the date the provisions were enacted originally in the Income Tax Act 1962. The competence of the legislature to enact or amend the law with retrospective effect is not in doubt but exercise of such power was rare. It used to be an exception rather than the rule. But this time, the retrospective amendments are being proposed just to nullify the effect of judicial decisions rendered by the courts and the tribunal. All the retrospective amendments are proposed in the guise of removing doubts as if the proposed amendments were the intent of the legislature from the inception. No objection can be raised if the decisions had been rendered overruling such legislative intent. But if no such legislative intent can be inferred then such proposals cannot be said to be bonafide. Nothing has been pointed out to indicate such intent in the year 1962 when the Act was enacted.

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Let’s Have One More Tax Amnesty Scheme: Rahul Bajaj

Shri. Rahul Bajaj

Let’s Have One More Tax Amnesty Scheme: Rahul Bajaj

Shri. Rahul Bajaj, Industrialist

Leading Industrialist Rahul Bajaj has suggested that to tempt black money hoarders to bring their billions of unaccounted money stashed abroad into India, a carrot-and-stick approach should be adopted. The hoarders should be offered an Amensty Scheme as an inducement to bring the money into india and as a threat they should be told that they will otherwise be sent to jail and their money will be confiscated

Leading industrialist Rahul Bajaj suggested at a CII interactive session with Finance Minister Pranab Mukherjee that the government could come out with an ‘One Time Amnesty Scheme’ to tax unaccounted money. Rahul Bajaj hastened to add that he did not like people who cheated on their taxes and he also did not like income tax officers who were corrupt.

On the aspect of tax amnesty, Rahul Bajaj suggested that if the people with black money in foreign countries did not avail of the amnesty scheme, they should be “sent to jail” (if and when convicted) and their black money should be “confiscated” (if and when found).

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Dear Income-tax Department, ‘Thank You’ For Ruining Indian Economy

Shri. Jaitirth Rao

Dear Income-tax Department, ‘Thank You’ For Ruining Indian Economy

Shri. Jaithirth Rao, Entrepreneurial Whiz-Kid

Jaithirth Rao, renowned entrepreneur, expresses deep anguish at the arbitrary manner in which the income-tax department is harassing Global BPO companies and raising bogus tax demands, forcing them to relocate their operations to foreign countries like the Philippines & China. This short-sighted approach of the income-tax department will ruin the Indian economy, he warns

Jaithirth Rao, entrepreneurial whiz-kid, has launched a blazing attack on the income-tax department for its arbitrary policies which is forcing large blue-chip MNCs to shift their BPOs from India to more reasonable Countries.

In a thought-provoking article in the Indian Express, Jaithirth Rao spoofs a letter from the Finance Minister of Philippines to the Finance Minister of India “thanking” the latter for the “vicious harassment” that the income-tax department has heaped on the Indian IT and BPO industries which has caused a shift of BPO businesses from India to the Philippines.

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