Govt sets up panel to untie I-T Act knots
The finance ministry on Tuesday set up a 10-member committee to review the Income-Tax Act to avoid litigation and improve ease of doing business, after solving past minimum alternate tax (MAT) cases and easing transfer pricing norms. The announcement came on a day when a World Bank report showed only marginal improvement in India’s ranking in terms of ease of doing business.
The panel has been asked to submit a preliminary report by January 31, so that some of its recommendations could be incorporated in Budget 2016-17.
“We have constituted a committee to simplify the provisions of the I-T Act… This committee will be conducting a study from time to time. As and when it keeps giving a bundle of suggestions with regard to simplification, we will examine those… for those found acceptable, we will try and simplify the provisions of the I-T Act,” Finance Minister Arun Jaitley told reporters here.
The terms of reference of the committee, to be headed by former Delhi High Court judge R V Easwar, include “studying and identifying the provisions, phrases in the (I-T) Act that are leading to litigation due to different interpretations,” went a ministry statement.
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Meanwhile, the ministry denied speculation that minister of state for finance Jayant Sinha had been asked to review retrospective amendments to the I-T Act. The new committee might well take up such amendments. During Jaitley’s visits to the US, a few investors had asked him about continuance of the amendments in the statute. This is despite the fact that any new case that leads to fresh liability due to retrospective amendments will be examined by a committee of the Central Board of Direct Taxes. Past cases, such as those with Vodafone and Cairn, are under international arbitration.
Jaitley said, “Through the past few months, we have been resolving a lot of past issues and now, the time has come to look at some provisions of the I-T Act, whether their drafting quality can be improved to avoid ambiguity so that everybody is certain on what the Act says.”
The panel will also study and identify the provisions affecting the ease of doing business. It could also include suggestions on “alternatives and modifications to existing provisions and areas so identified to bring about predictability and certainty in tax laws without substantial impact on the tax base and revenue collection”.
“The Easwar committee can form three sub-groups. The sections of the I-T Act that are posing the most litigation due to wrong drafting would be worked upon by the committee,” said revenue secretary Hasmukh Adhia. “As and when the committee submits a report, the I-T Act would be amended.”
“There are tonnes of things in the Act that require simplification, including chapters on transfer pricing and deductions for taxpayers. The chapter on capital gains, for example, is a complete patch work,” said Rahul Garg, leader (direct tax), PwC India. He added simplification of the computation of business income should be a priority, as this would help attract investment.
“The income computation and disclosure standard requires urgent attention, as this would be burdensome for taxpayers and strain companies.”
The panel, which will have a year’s term, will set its own procedures for regulating work. “The committee will put its draft recommendations in the public domain… After stakeholder consultations, the committee will formalise its recommendations. It could give recommendations in batches. The first batch, containing as many recommendations as possible, shall be submitted by January 31,” read an official statement.
Apart from Easwar, the committee comprises V K Bhasin, former law secretary; Vinod Jain, chartered accountant; Rajiv Memani, consultant; Ravi Gupta, senior advocate; Mukesh Patel, tax advocate; Ajay Bahl, consultant; Pradip P Shah, investment advisor; and Indian Revenue Service officers Arvind Modi and Vinay Kumar Singh.
