Narendra Modis nonadversarial tax regime

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Narendra Modi’s non-adversarial tax regime Customer Care No. 91-11-45562222 www.taxmann.com

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Introduction On 19 March 1955, Shri Jawaharlal Nehru, while addressing the members of the High Court of Punjab at the inauguration of its new building in Chandigarh, had said: " Justice in India should be simple, speedy and cheap ". He remarked that litigation was a disease and it could not be a good thing to allow any disease to spread and then go out in search of doctors. What he meant to embark upon was the fact that the judiciary of India is looked up with great respect and with a feeling of trust, faith and confidence by its various stakeholders. Thus, it would not be a good sign if the litigation syndrome would be allowed to broaden without having the adequate number of doctors, i.e. the courts, available to cure such diseases. As per the data released by the Ministry of Law and Justice recently in relation to pending cases, as on 19 February 2016, 48,418 civil cases were pending in the Supreme Court ( out of this, 1,132 cases have been pending for more than 10 years ). Further, as on 31 December 2014, 31,16,492 civil cases were pending in the High Courts ( out of this, 5,89,631 cases have been pending for more than 10 years ).Often it has been observed that once a matter goes into the judiciary pipeline, it can take around 10-15 years until the final verdict can be delivered by the Supreme Court of India; off course, it is true that not all matters would travel till the Supreme Court, but the long drawn litigation battle in India still does not get over in 3-4 years to say the least. 2 Customer Care No. 91-11-45562222 www.taxmann.com

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2. Indian Government - Perceived as a Litigation Loving Regime ! 2.1  Nobody is oblivious to the fact that the Indian government, perhaps, more often than not, appears in the Petitioner/Appellant side of a case title. In a recent interview, the Law Secretary has acknowledged that given the sheer size of the government and the number of decisions taken, the government will always be the biggest litigant. Hundreds of decisions are taken every day, and some of them are challenged in the courts. He also expressed that with respect to the disputes between two departments of the government, there should be an in-house mechanism for dispute settlement and said that this will form part of the government's soon to-be-announced National Litigation Policy. He said that " Under this, there should be a public grievance redressal system, and after that ADR methods should be tried. Only if these don't work should the courts be approached, and if a judicial forum has given a decision based on facts and not on law, to the extent possible, further filing of appeal by the government should be avoided. " 2.2  Indian government has always been perceived as a litigation (many a times, frivolous or vexatious) devoted government. This has led to the (un)popular notion among the corporate world that India's regulatory framework, in particular the revenue and commercial laws segment, is full of uncertainty and prone to change in the blink of an eye. Every businessman always dreams of a tax-payer friendly regulatory regime which is non-adversarial and low on sudden or abrupt changes. Often, the cost of fighting the case is more than the amount that would be recovered from the taxpayer as these cases take years before they are resolved. 3 Customer Care No. 91-11-45562222 www.taxmann.com

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3. How to Reduce Litigation? 3.1  Apparently, there can only be two modes which can lower the large number of pending suits in the different judicial for a of this country; either reduce the time in which a case is decided by the courts or reduce the number of case filings. Indian judiciary, being one of the most highly regarded judicial set-up in the world, ought not to be alleged as being sluggish in delivering judgments. Thus, the lone way to lessen the litigation burden would be to reduce the large number of, often repetitive, lawsuits being filed. 3.2  Off-course, the legislature cannot bar a citizen from taking its case to the court room for final adjudication. Resultantly, what the government is required to do is to put in place binding guidelines/instructions/directions for its lower authorities which either diminish the scope for differential interpretation to the already settled legal issues or forbid them from initiating legal action in some situations on the basis of the materiality of the issue involved (for instance, under the income tax law, the government has set various monetary thresholds below which the tax authorities are precluded from filing appeals against the taxpayers). 4 www.taxmann.com Customer Care No. 91-11-45562222

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4. Modi Government - Attempt for Stable Tax Regime 4.1  Recently, the Prime Minister outlined for the tax department a five point – agenda called RAPID – Revenue, Accountability, Probity, Information and Digitization and stressed the need for tax officials to carry forward the agenda. He emphasised that while there should be respect for rule of law among citizens and measures to disincentives tax evasion, people should not be harassed. The trust deficit between the income-tax department and taxpayers should be bridged. The government's aim is to increase the taxpayer base from the present level of 54.3 million to 100 million; in this regard, the Minister of state of finance pointed out " that there are 250 million households in the country, of which about 150 million may be agricultural households that don't have to pay tax. But this still leaves us with 10 crore (100 million) households ". 4.2  In line with these objectives, in the recent past, the tax department has taken a number of steps in this direction. The process from filing the tax return to the filing of an appeal before the first appellate authority has been digitalised . A pilot project for e-assessments has also been launched in some states. With an aim to have a consistent and coherent approach to the issue of tax policy and having regard for need to have an interdisciplinary approach, the government has recast the institutional arrangement for tax reforms and legislation, creating a Tax Policy Council headed by the Union Finance Minister. Currently, this function is handled separately by the Central Board of Direct Taxes ( CBDT ) and Central Board of Excise and Customs ( CBEC ) through Tax Research unit ( TRU ) and Tax Policy and Legislation ( TPL ) wings. The heartening thing to note that it is not just at the strategic level that the changes are being made; the government is also taking substantial steps to reduce the litigation, especially on the tax side, in the country. 5 Customer Care No. 91-11-45562222 www.taxmann.com

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6 To read more, please click here Customer Care No. 91-11-45562222 www.taxmann.com

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