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FINANCIAL EXPRESS: Towards a taxpayer-friendly
income-tax regime
The
first batch of recommendationsसिफारिशें by the Income Tax Simplification
Committee, headed by Justice RV Easwar, appears to be largely in line to meet
the objectivesउद्देश्यों
set in the terms of
referenceसंदर्भ given to the committee. These
objectives—relating to identifying the provisions in the Income-tax Act that
were leading to litigationमुकदमेबाज़ी on account of
differing interpretationsव्याख्याओं,
and those which were impactingको प्रभावित the ease of doing
business and recommending alternativesविकल्पों की
or modificationsसंशोधनों
to such provisions—are key to attract foreign direct investment (FDI) in India.
These
recommendations, although dealing with simpler issues, will impact a large
number of taxpayers. Hence, their immediate implementationअमल
is important and essentialआवश्यक. Some of the important aspects of the
recommendations are those relating to Section 14A, Income Computationगणना
and Disclosureप्रकटीकरण
Standards (ICDS), Tax Deducted at Source (TDS) credits, assessmentमूल्यांकन
procedures, refund of taxes, etc.
The
issue on classificationवर्गीकरण
of income from sale of shares as business income vis-a-vis capital gains seems
to be well-addressed. The recommendations provide that, unless otherwise
reported by the taxpayer, gains amounting to less than R5 lakh for shares held
for less than 12 months and gains for shares held for more than 12 months would
be treated as capital gains. The committee further suggests that the balance
cases should be resolvedसुलझाया
on the basis of the judicialअदालती interpretationव्याख्या
having regard to the facts of the case. The objective criteria recommended
would help reduce litigation to a large extentसीमा; it would also
reduce the burden on the taxpayer to prove the intentionइरादा
of holding the shares either as an investment or as stock-in-trade in several
cases.
In
addition, the committee has noted the areas of disputeविवाद
in respect of Section 14A, dealing with expenditure incurred in relation to
exemptमुक्त
income. It includes disallowanceपाबंदी by the tax
authorities without recording the basis of his satisfaction for applying the
provision and quantumमात्रा
of disallowance at times exceeding the amount claimed as expenditure due to the
artifice of normativeमानक
का/formulatory
approach of Rule 8D. It also deals with disallowance of interest in cases where
borrowingउधार
may not have been used to make investments earning exempt income. The proposalप्रस्ताव
for amendingसंशोधन
Section 14A and addressing the above issues is a welcome move, as it ensuresसुनिश्चित
करता
है
that the tax authorities do not mechanically apply Rule 8D, which is the bone
of contention झगड़े
की
जड़
in most cases.
The
committee, in light of decisions taken by a few courts—such as that of the
Delhi High Court in the Cheminvest case—may also look into the issue of
disallowance of expenditure in cases where no exempt income is earned during
the year, as this would eliminateखत्म unnecessary
litigation in this matter completely.
The
recommendation to defer ICDS is another refreshingly welcome suggestion, since
it allows all the stakeholders to analyse the impact of the proposed rules
before their implementation. The suggestion also indicates a fair outlookदृष्टिकोण of the committee on this issue, in the
background of the impendingआसन्न report of the expert committee
constitutedगठित
by the Central Board of Direct Taxes (CBDT) to clarify certain aspectsपहलुओं
of their implementation.
The
suggestion to reduce the incidence घटनाon non-residents
where the Permanent Account Number (PAN) is not available is another prudentविवेकी
move, considering that the deductibility of TDS at higher rates increases the
cost of doing business in India. The committee has recommended that the uniqueअद्वितीय
Tax Identification Numbers (TIN) of non-residents from their country of
residence should be sufficientपर्याप्त complianceअनुपालन,
which is an appropriateउपयुक्त
step, considering that the identification of such taxpayers could also now be
verified through Exchange of Information agreements being entered into by the Indian
government.
The
suggestion to simplify the procedure for claiming the credit of TDS will
provide much relief and cheer to taxpayers. By proposing an alternative to
over-reliance on the deductor revising his TDS return, the committee has paved
the wayमार्ग
प्रशस्त
for a smoother procedure for claiming the credit. Its implementation, along
with that for ease of transfer of TDS credit to the resulting company in a
demerger or restructuring, would help substantially काफी
हद
तक
reduce the headacheसिरदर्द
caused during the filing of tax returns and during assessmentsआकलन.
The
other recommendations of ensuringसुनिश्चित timely refund of
tax by the authorities and increase in rate of interest on the said refunds,
allowing fresh claim for expenditure or deduction during assessment
proceedings, disallowing the reopening or reassessment of cases wherein an
audit objection has been raised, and streamliningव्यवस्थित बनाने
the process of recovery of demand in disputed cases are also welcome.
The
report indicates a refreshingly strong focus on reducing the undue hardshipsकठिनाइयों
faced by taxpayers without impacting the tax base or revenue collections. The
recommendations, if implemented in letter and spirit, would bridge the
communication and trust gap between the tax authorities and taxpayers, and
would enable the objective of ease of doing business in India. A proper
implementation would also send out a strong message that India is ready to shedबहाना
its tag of ‘land of tax litigation’ and is becoming a truly investor-friendly
nation.
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