Advocate Akhilesh Kumar Sah

Ten Point Agenda: A Step towards Simplification of Scheme of Income Tax

The Income Tax is one of the ways of taxation through which evolved one of the concept of assessment of ‘black’ & ‘white’ money. Efforts are on to simplify & extend scope at the income-tax laws so as to make the scheme of income-tax, simple and tax-payers friendly. The following may prove to be useful for the purpose:

(i) The difficulties in the operation of Income Tax Act, i. e., problems of income-tax assesses should be outlined clearly with a view to identifying the reasons as to why people do not want to pay income-tax/ become income-tax assessees, etc. The system of Assessment Year/ Financial Year should be changed to one as it causes many practical problems.

(ii) The experts making the law should take into account the valuable decisions of the High Courts and Supreme Court on various controversial sections of the Income Tax Act to make it more precise and understandable by the tax-payers.

(iii) The best way to increase the effectiveness of the Income Tax Act will be to enhance the area of TDS provisions at various levels and by advertising the benefits of becoming a tax-payer and vice-versa. However, the TDS rates should be kept at lower levels so as to remove blockage of hard-earned money of taxpayers as well as to lessen the burden of refunds. Harsh rules and heavy penalities in respect of TDS defaults may be redefined.

(iv)The method of getting the information and its use without leakage too needs redefining.

(v) The tax-payers friendly schemes should be introduced to bring more persons under the Income Tax Act.

(vi)Honest as well as high tax-payers should be honored/ rewarded so as bring among them the sense of pride.

(vii) Legislatures be entrusted with the task of only making laws, exact position of the law come from the courts. Therefore some degree of latitude may be given to the appellate authorities so that assessees get genuine reliefs from them.

(viii) Wide powers (in respect of applying their discretion) have been given to the assessing officer under the Income Tax Act. To remove any misuse, a boundary line should be chalked-out in different sections of the Act.

(xi) To clear the pending income tax demands (alongwith interest) a compounding scheme may be introduced.

(x)  Computerisation and full automation is the thrust today. Many demands arise due to centralization of the datas and mismatches of the entries for which practical and necessary guidelines should be issued from time to time. At the offices of income-tax and while making this, regard must be had to the proper sitting arrangements for counsels & their clients.

The Supreme Court in CIT v. N.C. Budharaja & Co. (1993) 204 ITR 412 (SC) has observed that a statute cannot always be construed with the dictionary in one hand and the statute in the other without regard to the scheme, context and history of the provision. Where provision are in pari materiab between the English Act and the Indian Act and where local conditions do not materially differ from conditions in the U. K., one may, keeping in view the conditions in our country, look at the view taken by the English Courts and if consistent with our jurisprudence, our social conditions, our chalked out path in which the law must move, one profitably take help from the English decisions. There would be nothing wrong in referring to the same. But ignoring all the relevant considerations, one cannot bodily import English decisions in our system to  develop a hybrid legal system and one cannot be so hypnotised by English decisions as to overlook legislative changes introduced in Indian law Cotton Corporation of India Ltd. v. United Industrial Bank Ltd. (1984) 55 Comp Cas 423(SC)

The measure of the tax is not a true test of the nature of the tax. Therefore, while determining the nature of tax, though the standard on which the tax is levied may be a relevant consideration, it is not a conclusive consideration. With the aid of legal fiction, the legislature fastens the liability on the assessee. When the Legislature employs such a device and the liability is attached without qualification, if is reasonable to infer that an irrebuttable presumption has been created by law. Such provisions have been held to be within the legislative competence of the Legislature and as falling within its powers of taxation Union of India v. Bombay Tyre International Ltd. (1986) 59 Comp Cas 460 (SC). Words in the taxing statute should be given liberal interpretation. Nothing  is to be read and nothing is to be implied; one can look fairly at the language used and nothing more or less. Expressions used in a taxing statute would ordinarily be understood in the sense in which it was harmonious with the object of the statute to effectuate the legislative animation CBDT v. Oberoi Hotels (India) Pvt. Ltd. (1998) 3 DTC 2 (SC) : 231 ITR 148 (SC). Also the Supreme Court has observed CIT v. Shaan Finance (P) Ltd. (1998) 2 DTC 628 (SC) : (1998) 231 ITR 308 (SC) that while interpreting fiscal statutes, court cannot proceed to make good the deficiencies if there be any. The court must interpret the statute as it statute as it stands and in doubt, in manner favourable to the tax-payer.

Bottomline: There is continuous emphasis by the Central Government to repeal the unnecessary or old laws and to re-codify some of them. For example, the Gift Tax Act and Wealth Tax Act have been abolished and also, the new Companies Act, 2013 has already come into application. There is still need to change the complexities in our legal system.

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  1. nagarajn says:

    18-08-2015 Bangalore
    There is nothing new in your 10 points to bring in radical changes in the tax system.
    You are suggesting very generalised ideas; there is no clarity in your points.
    How can you club financial year and assessment year? Very ridiculous.

    I expect and demand more qualitative and well reasoned points on any issue.

  2. Abhilash says:

    TDS is very effective in collection, simultaneously the advance tax was to be simplified to one time payment within the fy (to reduce the transaction & interest cost).


  3. Gopalakrishnan nair says:

    I have a point to take up with.When pensioners/salaried persons are clubbed together for income-tax purpose,my point is that pensioners also should be allowed to claim deductions as eligible for salaried class,like hra,conveyance even though pensioners are ineligible for such allowances,yes of course from their own.

  4. VENKAT says:

    there should be easier method for income tax payers to get 16 and 16A forms easily online through TRACES instead from deductors who are always lazy to send these forms to deductees.

  5. Davidson D'sa says:

    While Gift and Wealth taxes have been abolished, Companies Act 2013, has created tremendous confusion with the authorities, themselves being confused. At least for individuals, Income Tax should be scrapped completely with the costs outweighing the revenue. It would be prudent, that income tax authorities, at least for individuals, implement a tax deduction system which would be related to credits in bank accounts. There should be no threshold exemption, no exemptions and deductions. This implies, let everybody pay tax from Re. 1 onwards depending on the ability to earn. E.g. the tax rate may be kept at a meager rate of say 3% on the amount receivable through cheque. Banks would before crediting the amount the accountholders’ account, barring loans, deduct 3% at source and leave balance to the credit of the accountholder. Compliance stops at this point. There should be no filing of returns. Resources freed from this source can be used for catching big fishes and rationalize the corporate tax system. Disposable amount can be used for any purpose which the person decides. this can increase the indirect tax revenue, thereby giving impetus to industrial production.Hope the authorities at North Block are listening.

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June 2021