Hon’ble Mr. Justice Dalveer Bhandari, Judge, Supreme Court of India

The Learned Judge laments that the Income-tax Act is a “national disgrace”. He says that it is unfortunate that the law is so complex that even practising Lawyers and Judges have to employ Chartered Accountants or tax experts to file their income tax returns. He uses his vast experience to provide several suggestions on how the law can be made simple, concise and effective.  

My Esteemed Colleague Hon’ble Mr. Justice Markandey Katju, Judge, Supreme Court, Hon’ble Mr. Justice Rakesh Tiwari, Judge, High Court of Allahabad, Mr. H.C. Bhatia, Chairman, All India Federation of Tax Practitioners (North Zone), Mr. Anil Kumar Singh, Chairman-Conference Committee, All India Federation of Tax Practitioners (North Zone), other members of the All India Federation of Tax Practitioners, other Hon’ble Judges, learned District Session Judges, Varanasi and other judicial officers, learned members of the Bar, distinguished participants, gracious ladies and gentlemen,Before I deal with my address I would like to convey my deep sense of gratitude to Shri Anil Kumar Singh, Chairman Conference Committee and Mrs. Singh for organizing ‘Rudra Abhishek’ on the Ganga. It was a unique experience for all of us. I on my own behalf and on behalf of all of us convey our greetings and gratitude to them. It was more like organizing their daughters wedding reception. They richly deserve our heartfelt congratulations and are also entitled for the blessings of a ‘Kanya Dan’ I am deeply beholden to the Chairman and Members of the All India Federation of Tax Practitioners for providing me an opportunity to share my views on such an important subject — “Global Economic Scenario — Role of Tax Professionals”.
In the conference, experts would be deliberating on important issues under the Income Tax relating to shares, securities and derivatives transactions, Input Tax Credit under VAT, important issues relating to business auxiliary services under Service Tax and Brain Trust. The subjects chosen for the conference are extremely fascinating and important. I am sure in depth discussion on these subjects would lead to crystallization of various aspects of Tax Laws. I am keenly looking forward to concrete suggestions of the conference. World’s Oldest City and Centre for learning, knowledge and wisdom.

Rich Cultural and spiritual heritage 

Right to tax does not include right to harassment Every Government has a right to levy taxes. But no Government has the right, in the process of extracting tax, to cause misery and harassment to the tax payer and the gnawing feeling that he has been made the victim of palpable injustice.
The organizers of the Conference deserve to be congratulated for organizing this seminar in one of the world’s oldest city-Varanasi. Once upon a time it was considered a great centre for learning, knowledge and wisdom. This city has immensely rich cultural and spiritual heritage. I deem it a privilege to share my views before this august, well informed and distinguished audience.

Taxation is as old as Mankind 

Taxation existed in one form or the other in almost every society of the world. Even Vedic texts talk about the right of the king to raise revenue by taxation.

Collection of Taxes only for the welfare of people Manu describes that the king should realize taxes, “little by little, as a leech, calf or bee, sucks blood, milk or honey” and the rates of tax should be reasonable and affordable to the people. Kautilya in is ‘arthshashtra’ suggests detailed taxation policies including tariff rates of direct and indirect taxes. Kautilya stated that the rates of taxation vary with the type of trade and business generating profits, the focus should always be on taxing net profits that too at moderate level. Kalidasa in his ‘Raghuvamsha’ says that the king gathers taxes from the subjects only to be utilized on their welfare, just as the sun gathers water only to return it a thousand fold.

Taxation in other parts of the country

 Taxation, as a revenue raising measure, has been adopted in the Anglo Saxon civilization as well as in European countries. The history of Indian Taxation starts with the first Income Tax Law, introduced in 1860 consequent to the financial difficulties arising from the Mutiny of 1857 which is known as the first struggle for Independence. India’s most celebrated tax expert, late Shri N.A. Palkhivala had once said that “Taxes are the life-blood of any government, but it cannot be over-emphasized that the blood is taken from the arteries of the taxpayers and, therefore, the transfusion has to be accomplished in accordance with the principles of justice and fair play.”

Most people may pay reasonable taxes 

In my considered view, most people would not mind paying reasonable taxes if they are made to realize the nexus between what they are paying and what they are getting in return. As citizens, we expect the State to provide roads, hospitals, water, electricity, transport etc. etc. this is possible only when the State gets money from taxation. Right to tax does not include right to harassment Every Government has a right to levy taxes. But no Government has the right, in the process of extracting tax, to cause misery and harassment to the tax payer and the gnawing feeling that he has been made the victim of palpable injustice. According to Holmes, ‘Taxation is the price we pay for civilization”.

Honest Tax & Development

 People must be informed that payment of honest taxes is imperative for our nation’s development . As a matter of fact, by paying honest taxes, people are helping the development of the nation.

Globalization and its impact on Legal Profession 

The globalization is primarily attributable to technological advancement in every sphere of life. The globalization has thrown new challenges before us. With the inception of latest technology in every sphere of life, the world seems to have become a global village. It has popularized the idea of free trade and commerce, a common market and of multiculturalism. In the wake of globalization, the trade and business throughout the world has become easy. The impact of globalization have witnessed the growth in huge international investments and business transactions all over the world. The increase in international economic inter-dependence has changed the entire scenario of world economy. The globalization has a great impact on the legal systems in general and on tax laws in particular. Because of globalization there is likelihood of increase in taxation litigation resulting into greater demand for expert tax practitioners.

Economic Scenario

 Increasing complexity of today’s society, complicated business deals, rapid technological changes and increasing governmental regulations demand constant study and interaction with the tax experts from all over. The tax practitioners have an obligation to themselves, their profession and their clients to continue refining their skills and expanding their substantive knowledge of law, particularly tax laws of other countries and their impact on our economy.
India is signatory of General Agreement on Trade in Services (GATS) and number of other international agreements. These multilateral trade negotiations resulted in the establishment of the World Trade Organization (WTO). India is also a member of the WTO. The GATS speaks of liberalisation of services. According to GATS, liberalisation of services is a means to promote economic growth of all trading partners and for development of developing countries. Trade in legal services and tax services are bound to grow fast in the coming years under the WTO regime. The liberalisation of the Indian economy had led to huge foreign investment in the Indian market and thereby increasing trade and business. The liberalisation of the economy has helped to gain GDP growth constantly.

Complex law – therefore constant demand of refining skills

 Increasing complexity of today’s society, complicated business deals, rapid technological changes and increasing governmental regulations demand constant study and interaction with the tax experts from all over. The tax practitioners have an obligation to themselves, their profession and their clients to continue refining their skills and expanding their substantive knowledge of law, particularly tax laws of other countries and their impact on our economy. This Conference organized by the Federation of Tax Practitioners is a part of Continuing Legal Education for the tax practitioners. As such, organizing a Conference by the tax practitioners being an important component of legal profession must prove to be of immense utility for all the members of the Federation.

Knowledge of Tax Provisions of other Countries

 In view of globalization, our tax structure has to be transparent so that our trade, business and commerce can be globally competitive. It is imperative that our tax experts should also acquire knowledge of tax provisions of other countries.

Lawyers & Judges need help of tax experts to file their Returns

 In my considered view, tax laws, in order to be effective, are required to be concise and simple. The provisions must be simple that any educated person can understand and file his return without the assistance of Tax Experts. Unfortunately nowadays even practising Lawyers and Judges have to employ Chartered Accountants or tax experts to file their income tax returns.

Complicated Income Tax Act

 It is rather unfortunate that a person of great equanimity and eminence,Mr. N.A. Palkhivala, had to call the Income Tax Act, 1961 as a national disgrace. In support, he stated: “There is no other instance in Indian jurisprudence of an Act mutilated by more than 3300 amendments in less than thirty years. Simple provisions like sections 11 to 13 (which deal with exemption of the income of charitable trusts) have suffered no less than fifty amendments.”

Provisions Simple and Concise – cases decided within reasonable time

 There are many aspects on which long debate or discussion is possible. Provisions of the Tax Laws would acquire greater credibility, if provisions are made simple and tax litigation is finally decided within reasonable time. Unfortunately, in most matters before they reach High Court and finally decided by the Supreme Court, it may take several years. This situation is continuously aggravated by deluge of new amendments — indigestible new amendments.

Suggestions

 This is a distinguished gathering of tax experts from all over the country. You are familiar with the laws and bylaws of tax legislation but now from the point of view of the comman man I have few suggestions about tax laws and its administration I request this august house to consider following suggestions during the course of your serious deliberations:
• Tax laws must be clear and unambiguous.
• The language of the statute must be simple and concise.

• The tax authorities must announce well considered long term taxation policies for ten years or so. The people of this country must be clearly assured the tax policies and tax structure would remain in force at least for a period of ten years so that they can properly arrange their affairs accordingly.

• Tax laws need to be rationalized and provisions of the Act be simple and concise. Proper tax legislation is imperative for any nation.

• There is an urgent need to improve the tax collecting agencies. The tax authorities need to be very stern with people who despite having taxable income are not the assessees but at the same time they must ensure that undue inconvenience and harassment to the honest taxpayers is avoided.

• Taxpayers must be treated with respect by the tax authorities. Bona fide and genuine mistakes or lapses should not lead to prosecution.

• The tax authorities should resort to the court litigation only when it becomes absolutely imperative.

• Taxation is a fascinating branch of laws though highly complex and complicated to comprehend. Therefore, it is necessary that the tax experts must not only be well versed in tax laws but they must also acquire adequate knowledge of subjects like economics, accountancy, commercial laws, personal laws relating to property and to some extent some knowledge pertaining to civil and criminal laws. This is absolutely imperative for providing effective services to the litigants. This august house considering of tax experts from all over the country must

• Seriously deliberate on the issue how tax cases can be disposed of within a reasonable period, otherwise our system would never acquire credibility.

• Tax experts are also bound by the professional ethics and they must help their clients in their proper tax planning but refrain from giving advice of tax avoidance. They must ensure that the spirit of the laws is properly carried out and implemented.
• Government must consider that salaried class people be asked to file income-tax return only if they have any other income. Whatever portion of the income the Government wants to deduct, it must do so before the payment of salaries. This would avoid inconvenience to a large section of the society and correspondingly the Government would be saved of huge staff engaged in collection of taxes from the salaried class employees.
• The Government should adopt pragmatic and prudent approach in tax collection. The Government should not spend more money in tax collection process from the people than the tax collected. (Reference is made to class III and Class IV employees of the Government)
• The State is the biggest litigant before the Court. The Central and the State Governments must ensure that frivolous cases which do not raise any substantial question of law should not be filed in the Courts.
• The Tax Experts must continuously involve in the process of introspection and innovation in order to meet the new challenges thrown by globalization and liberalization. Those who do not innovate are soon discarded as outdated by the society.

Conclusion

 The topics chosen for deliberation in this Tax Conference are of utmost importance and relevance. By deliberation on these subjects, we may equip the lawyers and judges of the new generation to meet the new challenges of legal profession and judiciary. A close interaction and active participation by the lawyers and judges in this Conference would be extremely fruitful and of immense use not only for them but the beneficiary would ultimately be the consumers of justice. I hope that the meaningful deliberation in the light of the landmark judgments of the Supreme Court and judgments of other countries would prove extremely useful for the participants of the Conference and also strengthen our justice delivery system. While concluding, I would like to reiterate that our tax administration can acquire credibility if our tax laws are simple and concise and tax cases are decided within reasonable time. Once again I convey my deep sense of gratitude to the organizers of this Conference for giving me an opportunity to share my views on a very important subject.
[Source: Speech delivered at AIFTP’s Two Day National Tax Conference held on 7th and 8th March, 2009 at Varanasi.]

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0 responses to “Income-tax Act is a “National Disgrace” – Justice Dalveer Bhandari, Supreme Court”

  1. Rajendra Chaturvedi says:

    I am agree with the feelings but when we go through all other laws, in all respect of day to day life, it comes the same feeling and disgrace, changes are a need as a whole.

  2. ASHISH M says:

    i m fully agree with the views above but wonder whether action can be taken on it soon………

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