TIOL-DDT 2493
10.12.2014
Wednesday

IT is an admitted fact that the tax culture is lacking in India. Despite considerable efforts to widen the tax base, the number of taxpayers is about half the number who should pay tax if they adhere to the law. Although the rates have been lowered over the years, the country still lacks the desired tax culture that exists in developed nations. It is time perhaps that tax is not considered a burden but a price for public services, if not for civilisation itself.

The education and publicity programme should go hand in hand with creating a tax culture and environment that maximises voluntary tax compliance. This requires tax rules and regulations that are sensitive to economic and commercial conditions and that are system-oriented and do not cater to individual interests. Generating an environment and tax organisational ethos that encourages maximum voluntary compliance is the direction in which Indian tax administration should move.

To develop a tax culture, revenues collected should be wisely spent and taxpayers should be able to see how their tax money has been spent. This will encourage them to pay willingly and may be happily. Tied to this is the need to curb corruption and tax evasion. Every rupee collected that is misapplied reduces monies that would otherwise be available to the government for developmental purposes. Corruption serves as a disincentive to payment of taxes. The fight against corruption must be continuous and sustained. The taxpayer should be treated as king. If there is no taxpayer, there is no assessment and no tax revenue and hence no growth. In India, however, taxpayers feel that they are being treated harshly and punitive provisions in tax laws are applied ruthlessly against them. Hence, a large proportion of people consider it prudent to keep a distance from the tax department and the number of non-filers of tax returns is increasing. Many taxpayers become defiant, demotivated and disillusioned because of wrong notions held by tax collectors about their powers, the desire to pass on their part of work to taxpayers, indifference towards them and an attitude that assessees are out to manipulate figures and evade taxes. Such notions strike at the root of a healthy tax culture. A proper tax culture can develop only when taxpayers and tax collectors discharge their obligations equally well. The principle of mutual trust and accountability should be followed. All taxpayers should be responsible and accountable on all tax issues, including transparency, to the government. The government on its part should also be responsible and accountable to citizens on all issues related to taxation.

Tax professionals can also play a role in this. Apart from advising their clients on the present tax scenario, which is more liberal than in earlier decades, tax professionals can play a vital role in educating taxpayers on why they need to pay the right amount of tax; the need to declare their income, pay income tax and furnish income tax return within the prescribed time; the penalties associated with default or delay in fulfilling one's obligations and the actions that the authorities could take against tax evasion and other serious lapses including prosecution.

From the viewpoint of ‘taxes', it is not only the tax system and actual tax practice that form part of a country's ‘tax culture', but also the relationship between the tax authorities and taxpayers. How explicit and precise the tax law is and consequently, how violations are treated will also have a bearing on the development of a tax culture. In nutshell, tax culture is the entirety of all relevant formal and informal institutions connected with the national tax system and its practical execution.

One of the major conditions for tax compliance is a conducive political environment. Taxpayers comply readily with tax laws when they have the assurance that the tax administration is for them and their perceived interests and well-being are protected. The contrary is the case when they feel politically oppressed or victimised. This is why voluntary compliance is always easy under a favourable political climate.

However, opportunities for corruption are pervasive in tax collection; hence, a comprehensive anti- corruption strategy including effective internal audit is necessary. But this cannot happen without support from the top policy making levels. The existence of huge tax evasion signifies the absence of such support.

From the Third Report of the Tax Administration Reform Commission (TARC)

The Ills of Tax Administration - And the TARC Solution

a) Timely clarificatory circulars can substantially reduce disputes and litigation. The TARC found very little proactive use of the statutory provisions that enable the Boards to issue such circulars. The TARC therefore recommends that:

1. The two Boards must proactively issue clarificatory circulars.

2. Such circulars should invariably invoke the relevant statutory provisions under which they are issued. They should be expressed in simple and lucid language, avoiding jargon.

3. The Boards must ensure that all officers adhere to these circulars and avoid taking legal positions in disputes contrary to the circulars.

b) The TARC found that the success rate of the Departments in litigation was very low. This is on account of the poor quality of orders and aggressive revenue target-oriented decisions. The TARC recommends that:

1. The Boards should ensure avoidance of such decisions by reviewing and improving the quality of orders from the perspective of fairness, legality and propriety, irrespective of the revenue consequences.

2. They should desist from filing of appeals against well-reasoned and sound orders passed by their officers simply because they are pro-taxpayer.

3. They should take notice of capricious orders, irrespective of revenue consequence and discipline the errant officers - even by meting out punishment where required.

c) At present, there is lack of trust and mutual suspicion between the taxpayers and the administration, which impedes the promotion of voluntary compliance. Therefore, the Boards must strive actively to create a trust-based administration.

d) Both the Boards will need to infuse life in their Vision and Mission statements to create avalue-based administration by strengthening their internal governance supported by an effective performance management framework. This would require the development of performance measures and indicators that would bring about coherence between organisational goals and individual behaviour.

e) The NADT and NACEN must give the highest priority to shaping of leadership and inculcation of the code of ethics. This should be done through structured leadership programmes, designed with the help of national and international institutions of repute.

f) A wholesome set of goals that focus on minimising the tax gap should be set up and coherent strategies and programmes should be designed to achieve those goals in place of the present compulsive obsession with revenue maximisation by any means.

g) Both the Boards must recognise and accept a re-defined role of a regulator rather than that of purely an enforcer.

h) The values of taxpayer service should be imbibed not only in the taxpayer services function, but across the whole organisation.

i) A code of ethics containing the delineation of the standards of behaviour and conduct should be jointly developed by the Boards in order to give concrete shape to values such as professionalism, objectivity, courtesy and helpfulness and be actionable where deviance is noticed. This code could supplement the Conduct Rules governing the conduct of civil servants.

j) A coherent and clearly articulated framework should be developed by the two Boards that would weave the different aspects of the Departments' functioning together into a well-directed movement towards the goal of compliance maximisation. This would enable an assessment of the overall performance against goalposts on that journey.

k) The strategic goal of the tax administration should be to exert such influence on the compliance environment as would maximise voluntary compliance and minimise non-compliance. All decisions, whether strategic or operational, should be tested against the touchstone of whether they promote such movement or not.

l) Both the Boards need to develop and implement an effective communication policy intended to eliminate asymmetry of information between the taxpayer and the tax administration and ensure that taxpayers have access to all information that is relevant to compliance.

Anti Dumping Duty on Cable Ties - Re-imposed

THE Anti Dumping Duty on Cable Ties falling under the sub-heading 3926 90, originating in, or exported from, the People's Republic of China and Taiwan was imposed by Notification No. 44/2009-Cus dated 30.4.2009 with effect from 31.10.2008 and would have been in force till 30.10.2013.

The Designated Authority recommended modification of the existing anti-dumping duty.

So, the Government superseded Notification No. 44/2009 and imposed fresh anti dumping duty on the product with effect from 14.12.2012 by Notification No.56/2012-Customs(ADD), dated 14th December, 2012, but this was to remain valid only till the validity of the original notification that is 30.10.2013.

The Designated Authority requested for extension of anti-dumping duty up to 30th October 2014.

And so by Notification No. 28/2013-Cus(ADD), dated 12.11.2013 - 13 days after its official death, they extended the validity till 30th October 2014.

This expired again on 30th October 2014.

Now they have re-imposed the duty with effect from 09.12.2014 for a period of five years.

Do they leave the gaps to help somebody?

Notification No. 47/2014-Cus.,(ADD), Dated: December 09, 2014

Babus can dance - but within Conduct Rules; Borrow Female Artists?

THE Central Civil Services Cultural and Sports Board is organizing the Inter-Ministry Music, Dance and Short Play competition 2013-14 from 27th to 30th January, 2015 at C.S.O.I Auditorium, Vinay Marg, New Delhi.

Though the babus are going to sing, dance and play for three days, they have been warned that participants of inter-Ministry Music & Dance competition being government employees are subjected to the provisions of conduct Rules. Any violation of these provisions would invite disciplinary proceeding.

It seems recently two senior officers of the Chhattisgarh Government were stuck with notices for violation of Conduct Rules for dancing with Amitabh Bachchan - Conduct unbecoming of a Government servant!

The organisers of the cultural meet for the babus have other bureaucratic instructions for the officers who want to participate in the competitions.

Here are some important rules:

1. All Male artists in a play should necessarily be amateurs and working in Offices of the Central Government located at Delhi/New Delhi eligible to participate in the competition.

2. Lady artists may be amateurs working in Central Government Offices at Delhi/New Delhi or the family members of the Central Government employees.

Family as indicated above, means a government servant's wife/husband residing with him/her and legitimate children or step children residing with and wholly dependent upon the him/her. Wives of Central Government employees if serving in non eligible offices are also eligible to participate.

3. Normally all artists participating in a drama in the competition would belong to the Ministry which enters that particular play in the said competition. But where necessary a Ministry may borrow female artists from another Ministry with prior permission of the Board and the Ministry concerned.

Maybe the welcome address will read something like, 'whereas it appears that the Government have in public interest after taking into consideration the opinion of several expert committees, decided to provisionally permit the organisation of this competition subject to all the participants following all the required conditions as per all the rules that for the time being exist in India and subject to the satisfaction of the Joint secretary in the Department of Personnel, to be recorded in writing prior to the closure of the meet, I hereby, in exercise of the powers vested in me, under the various Acts and Rules as detailed in pages 16 to 256 of the brochure brought out on this occasion with the sanction of the President, without prejudice to any other actions permitted under the law, welcome you all to this meet.

At the outset, I am directed to inform you that while there is no provision in the rules to prohibit any Government servant from enjoying this meet, it is brought to the notice of the concerned participants that they remain Government servants even while singing or dancing and the Conduct Rules are applicable at all times. It may please be noted that the meet is subjected to CAG audit and the respective Ministries are responsible for the SOFs and DAPs ………

DoPT Circular No. 12/1/2013-14 - CCSCSB, Dated: December 08, 2014

Jurisprudentiol-Thursday's cases

Customs

Import of Coal - "Steam Coal" or "Bituminous Coal" - Appeal against pre-deposit - No substantial question of Law: HC

COMMISSIONER of Customs held that the coal imported by the appellant was "bituminous coal" classifiable under SHN 2701 1200 of the Customs Tariff Act, 1975 and not "Steam Coal" as claimed by them and consequently attracted duty. He rejected the classificat ion of the coal and determined the differential customs duty payable by the appellant at Rs.2,09,40,075/- and also ordered recovery of interest at the applicable rate on such amount and imposed penalty of Rs.31,00,000/- under section 112(a) of the Customs Act, 1962. By the impugned order, the stay application has been partly allowed by the Tribunal directing the appellant to deposit a sum of Rs.20,00,000/- as a condition for hearing and disposing of the appeal on merits and granting waiver of pre-deposit of the balance amount involved and staying the recovery thereof.

Against the order of pre-deposit, the importer is before the High Court.

Income Tax

Whether date of allotment letter issued by builder of flats is relevant date for acquisition of property for purpose of Sec 2(42A) - NO: HC

ASSESSEE had purchased the undivided share of land of 2150 sq.ft. out of a large extent of 4 grounds and 400 sq.ft. situated in S.Nos.2766 and 67, RS No.1570/4 at No.1, Binny Road, Chennai. Prior to the purchase of this undivided share in land, assessee had entered into an agreement with M/s. Vishranthi Homes Pvt. Ltd.(VHPL) for constructing the built-up area of 3465 sq.ft. including common area in the above-said undivided share of land. The agreement was for purchase of land as well as for construction of home by a project promoted by VHPL. The agreement was determined for a consideration at Rs.81,68,811/- to be paid by the assessee to the builder VHPL towards construction of the residential unit. Thereafter, the assessee sold the entire unit by a sale deed dated 10.4.2008 well after 36 months from the date of agreement dated 22.2.2005 and claimed the difference between the cost of acquisition and sale consideration as long term capital gains. The AO held that the undivided share of land was registered on 4.8.2005 and since the property was purchased in the month of August, 2005 and sold in April, 2008, the capital gains arising from sale will be assessed as short terms capital gains only and accordingly, AO denied benefit of Section 2(29A) and made addition. On appeal, CIT(A) had allowed the appeal filed by the assessee.

The issue before the Bench is - Whether date of allotment letter issued by builder of flats is the relevant date for acquisition of property for purpose of Sec 2(42A). NO is the answer.

Service Tax

Question of levying to service tax transportation by barges from mother vessel to jetty onshore would not arise at all since said activity is part of import transaction leviable to import duty - Appeals allowed: CESTAT

IT is a settled position in law that when a new entry is brought under service tax levy, the same activity cannot be subjected to levy under an existing entry unless the new entry is carved out of the existing entry as held in Indian National Shipowner's Association - 2008-TIOL-633-HC-MUM-ST. Therefore, there cannot be any demand for service tax on coastal transportation of goods prior to July, 2009. Further the goods transported by the appellant is also covered by Notification 30/2009-ST. The demand of service tax under the category of cargo handling service has to be set aside especially when the activity is squarely covered under the entry of coastal transportation of goods.

See our Columns Tomorrow for the judgements

Until Tomorrow with more DDT

Have a nice day.

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