F.No. 279/M-6112012-IT.l
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct taxes
(A&l Division)
New Delhi, the 281h August, 2012
OFFICE MEMORANDUM
Sub: Institutional Mechanism for Forming Departmental View on Contentious Legal Issues
It has been observed that a large part of litigation in the Direct Taxes matters involves interpretation of legal provisions. Lack of desired clarity on a contentious legal issue, amongst the officers of the department, sometimes leads to inconsistent approach on the same issue giving rise to further litigation. With a view to provide clarity on contentious legal issues, promote consistency of approach on a given issue and reduce litigation, it has been decided to set up the following institutional mechanism to formulate ‘Departmental View’ on contentious legal issues:
Central Technical Committee
2. There shall be a Standing Committee in the Board known as “Central Technical Committee (CTC) on Departmental View” with the following members:
(i) JS (TPL)-II, CBDT
(ii) CIT(ITA), CBDT,
(iii) DIT(Research)/CIT(OSD), Directorate of L&R, Member Secretary
The CTC may co-opt JS(FTD), CIT(Inv.), C1T(IT&CT) or CIT(A&J) as may be required. The senior-most member shall act as Chairman of the CTC in its meetings. The CTC may also invite any officer of the Department conversant with the matter for relevant inputs and deliberations.
The Secretariat
3. There shall be a Secretariat to assist the CTC. The Secretariat shall be headed by the DIT(Research)/CIT(OSD) under the supervision and control of the DGIT(L&R). The Secretariat will conduct research and provide inputs necessary for the CTC to deliberate upon the issues and formulate the ‘Departmental View’ for consideration of the Board. The DIT(Research)/CIT(OSD), being the member secretary of the Committee, shall be the liaison officer between the Committee and the Secretariat.
Regional Technical Committee
4. In order that the contentious legal issues are first discussed at the local level and duly filtered, each CCIT(CCA) shall constitute a “Regional Technical Committee” (RTC) consisting of the following members :
(i) One administrative CIT
(ii) One CIT(DR)
(iii) CIT(Audit)
(iv) CIT(Judicial)/one CIT(A)
Addl. CIT(J)/Addl. CIT(Technical) in-charge of judicial work in CCIT (CCA)’s office shall act as Secretary to the RTC. The RTC may invite any other officer, conversant with the issues under deliberation, to its meetings.
Identification of Contentious Legal Issues
5. Any issue considered as contentious and having wide implications shall be referred to the RTC as and when the issue is identified. The possible sources to identify such issues may include the following:
(a) The administrative CIT
(b) The CIT(DR)
(c) The CIT(A)
In addition to the above, any officer may refer an issue considered contentious to the Secretary of the RTC through the CIT concerned. The RTC may also pick up any issue for consideration suo motu.
Procedure at Regional Technical Committee
6. The Secretary of Regional Technical Committee shall place the references for consideration of the RTC. The Committee shall meet at least once a month. However it should be ensured that no reference is pending for more than two months. The CCIT(CCA)/CCIT looking after judicial matters of the station, shall supervise the functioning of the RTC.
7. The RTC shall examine the issue with reference to the relevant provisions of the Income-tax Act and the judicial decisions available on the issue. The Regional Technical Committee shall refer the issue to the Central Technical Committee if it is of the view that-
(i) there are conflicting interpretations by ITAT/High Court/AAR in respect of a statutory provision, or
(ii) the interpretation of a statutory provision by ITAT/High Court/AAR defeats the legislative intent, or
(iii) the dispute involves substantial revenue or has wide ramifications, or
(iv) the issue involved is resulting in large scale litigation,
(v) there is any other reason for referring the issue to the CTC.
The proposals to CTC should include:
(a) A brief referral note specifying the controversy.
(b) Copies of relevant orders i.e., order of Assessing Officer, CIT(A), ITAT, High Court etc. as may be available.
Work Process of the Central Technical Committee
8. The Secretariat may receive references for the consideration of the Central Technical Committee from CBDT, RTCs and DsIT(L&R). The CTC may also pick up any issue for consideration suo motu.
9. The proposal shall be first processed by the Secretariat as may be directed by the Committee to enable it to formulate the Departmental View, taking into account various aspects and divergent opinions on the issue. The Committee shall take up references to formulate ‘Departmental View’ considering their relative importance. However the reference received from the Board shall be taken up for consideration on priority.
10. The CTC shall regulate its own functioning. However the CTC shall meet at least once in a month. Once a question is taken up for consideration, the Committee shall examine the same and form a tentative view taking into account divergent opinions on the issue. The tentative view may be circulated to the Regional Technical Committees of all the CCsIT(CCA) seeking their response. The RTCs may, before giving feedback to CTC on tentative view, discuss the issue on its own and/or seek inputs from other field officers. The CTC may also call for opinion from professional bodies and retired judges etc, as it may deem fit. The CTC may also solicit opinion of Ministry of Law through Member (A&J) in suitable cases.
11. The CTC shall also get the views of the respective divisions of the Board on the issue involved. If views of the concerned divisions are different/conflicting with the tentative view of the CTC, the matter shall be resolved by discussion of Member (A&J) with the Member(s) concerned. Thereafter final draft will be prepared and sent for examination by the Circular Group of the Board. The draft ‘Departmental View’ will then be put up through Member (A&J) to the full Board for consideration.
Dissemination of ‘Departmental View’
12. If approved by the Board, the ‘Departmental View’ will be issued as Circular u/s 119 of the IT Act by ITJ division of the CBDT for compliance by all concerned.
13. Where any High Court decides an issue contrary to the ‘Departmental View’, the ‘Departmental View’ thereon shall not be operative in the area falling in the jurisdiction of the relevant High Court. However the CCIT concerned should immediately bring the judgment to the notice of the CTC. The CTC shall examine the said judgment on priority to decide as to whether filing of SLP to Supreme Court will be adequate response for the time being or some legislative amendment is called for.
14. The above mentioned institutional mechanism comes into force with immediate effect.
(R.K. Yadav)
Commissioner (A&J)
To,
All the Chief Commissioners of Income Tax
All the Directors General of Income Tax
All Joint Secretaries/Commissioners, CBDT
It is only because of, or whenever the Revenue, as has been historically the repetitive story, chooses / is hell bent upon taking and pursuing a view contrary to that of tax payer, more often than not callously ignoring what any given enactment clearly says, that an ‘issue’ arises; hence happens to be ‘contended’. In view of this reality, the very idea of setting up a committee as spoken of, to – “form departmental view “, and, on “contentious legal issues”, does not prima facie seem to make much sense ; much less carry even an iota of conviction behind the move. That is the indelible impression one is left with even on a cursory glance through the circular.
In this context, one is irresistibly provoked to recall what the most renowned lawyer and outstanding tax expert of our times, late Palkhivala remorsefully said:
Q
The greatest illusion of our people is the infantile belief in the legal solubility of all problems. In the wise words of Lord Halisham, the former Lord Chancellor of the UK, “We might do well to remember that in the whole realm of human relations there is no field more vulnerable to corruption, dishonesty, chicanery, and sheer quackery and charlatanism than contested litigation.. real, imagined or invented”. We might also do well to consider that few of the safeguards we have achieved against these evils…”
UQ
(source: WE, the Nation THE LOST DECADES, published article in 1990)
Hoping on hopes, against all odds, one prefers to be left with a wishful thinking that ,perhaps, a drastic change will happen in, in general, the legal system and in the commonly observed behavioural pattern of one and all concerned ; And, in particular, in the recalcitrant attitude of the Revenue, SOME DAY IN THE FORESEABLE FUTURE WHEN THE WISDOM UNDERLINED IN THE ABOVE QUOTED STIRRING WORDS WHICH CAME FROM THE HEART COMES TO BE TRULY REALISED.
Add-on: Subject, of course, one not being disheartened by continuously reported court cases; e.g. the lately reported one, though under the company law but with no difference in complexity – ref. indiacorpblog, link >Scheme of Arrangement & Tax Authorities: The Vodafone Essar Case
Well Paragraph 13 interestingly talks about legislative ammendment as an alternative to filing a SLP before the Supreme Court of India. Looks like the CTC has been constituted with the specific objective of overriding judicial decisions even before they reach the Supreme Court.
The tax department seems to working on the philosphy “Heads I will , tails you loose”