TIOL-DDT 2633
03 07 2015
Friday

THE Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (22 of 2015) received the assent of the President on 26th May, 2015.

Sub-section (3) of section 1 of the Act provides that save as otherwise provided in the Act, the Act shall come into force on the 1st day of April, 2016.

Now, the Government has amended the Act to make the Act effective from 1.7.2015 instead of 1.4.2016.

When about 800 Members of Parliament and the President of India have passed an Act and declared it to be effective from 1.4.2016, can some Under Secretary sitting in North Block or for that matter the Finance Minister change the date to 1.7.2015, instead of 1.4.2016, as passed by Parliament?

Section 86 (1) of the Act reads as: If any difficulty arises in giving effect to the provisions of this Act, the Central Government may, by order, not inconsistent with the provisions of this Act, remove the difficulty.

It is under the powers conferred by the above Section that the Government has amended the effective date. The Section stipulates:

1. A difficulty should arise,

2. The difficulty can be removed,

3. The removal should not be inconsistent with the provisions of the Act.

When Parliament says the Act is effective from 1.4.2016, is it not inconsistent with the provisions of the Act to say that it will be effective from 1.7.2015.

What is the difficulty?

According to the Government:

1. The Act provides for charging of tax on undisclosed foreign income and asset for every assessment year beginning on or after the 1st day of April, 2016;

2. As per sub-section (1) of section 3 of the Act, undisclosed foreign income and asset of the previous year relevant to the assessment year commencing on or after the 1st day of April, 2016 is chargeable under the Act;

3. The ‘previous year' as defined in clause (9) of section 2 of the Act means a period of twelve months immediately preceding the assessment year;

4. Section 59 provides for making declaration by any person, on or after the date of commencement of the Act but on or before a date to be notified by the Central Government in the Official Gazette, in respect of any undisclosed asset located outside India and acquired from income chargeable to tax under the Income-tax Act, for any assessment year prior to the assessment year commencing on the 1st day of April, 2016;

5. Section 60 of the Act provides for charging of tax on undisclosed foreign asset declared under section 59 on the value of such asset on the date of commencement of the Act;

6. The Act passed by the Parliament received the assent of the President on the 26th day of May, 2015 and therefore the provisions of this Act cannot be given effect prior to the 26th day of May, 2015 irrespective of the fact that the assessment year beginning on the 1 st day of April, 2016 relates to the previous year commencing on the 1st day of April, 2015;

And difficulty has arisen in interpreting the expression 'date of commencement of the Act' and giving effect to the provisions of section 59 and section 60 which may be construed as 1st day of April, 2016, whereas the chargeability of tax under the Act is for assessment year commencing on or after the 1st day of April, 2016 relevant to the previous year commencing on or after the 1st day of April, 2015.

This is perhaps the first time in history that there is difficulty in understanding what date of commencement means!

So, the Government has removed the difficulty by substituting "the 1st day of April, 2016", with "the 1st day of July, 2015" in Section 1(3) of the Act.

Who created the difficulty? Obviously, the government itself. When they prepared the law, didn't the wise babus know of a concept called, "previous year"? Isn't the Finance Minister being taken for a ride, by drafting defective laws and then getting them corrected by an executive order? If the babus are the ultimate repositories of all wisdom, knowledge and law, why do we need a Parliament to legislate? As such, all modern laws are babu-made laws with hardly any legislative scrutiny; should Parliament be further insulted with the babu amending an Act passed by the Supreme legislature?

CBDT Notification No. 56/2015, Dated: July 1, 2015

The Henry VIII Clause?

SEE this story by Prof. Douglas Whalan:

Once upon a time, a very long time ago, there lived a very wicked king – and he was a king with a capital "K". The name of this king was King Henry VIII. He was a very large man,... we also had it on good authority that he ate very large meals,… he certainly had a large number of wives, admittedly most of them only for a short period of time. He also decided to have very large powers to make laws, and so it came to pass that this large King ensured that there was an Act. And if this very large King hadn't got his Act, probably someone would have got an axe. This Act was called the Statute of Sewers. That is not sewers as in Suez Canal, because this was long ago in 1531. The Statute of Sewers really was a stinker.

'The Statute delegates legislative powers, taxing powers and judicial powers.'

Ever since then, those good fairy godmothers, Parliament and scrutiny committees, have been trying to undo that kind of excessive grant of power. And but for those Parliamentary scrutiny committees and the courts, we would have all lived very unhappily ever after. Even today there are still some "Henry VIII clauses", so we all remain relatively miserable."

"Henry VIII" clause is explained as: Some statutory instruments are made under provisions of Acts which allow the instrument to change the parent Act itself, or to change other primary legislation. These provisions, allowing primary legislation to be amended by secondary legislation, are known as "Henry VIII" clauses, because an early example of such a power was conferred on King Henry VIII by the Statute of Proclamations 1539.

An expert says, "A Henry VIII clause is so called because of the penchant of the English monarch of that name to give himself power to amend (and in some cases to suspend or dispense with) statutes passed by the Parliament. So the expression "Henry VIII clause" has come to mean "a provision in a Bill which enables primary legislation to be amended or repealed by subordinate legislation with or without further parliamentary scrutiny". After the death of Henry VIII, such clauses fell into disuse. It was not until the Thatcher era that these clauses became frequent. This was paradoxical, even surprising, when one recalls that Mrs Thatcher had pledged "to get government off the people's backs." However it was not the then Prime Minister who was responsible for the re-emergence of these clauses but rather the influence of civil servants, who found it convenient to circumvent the need to obtain Parliamentary approval for subsequent amendments to the statutes concerned."

The legacy of Henry VIII continues – in India.

The Supreme Court had in 1966 in Jalan Trading struck down the clause in Section 37 of the Payment of Bonus Act, observing that "power to remove the doubt or difficulty by altering the provisions of the Act would in substance amount to exercise of legislative authority and that cannot be delegated to an executive authority". But later in 1974, in the Gammon India case, the Supreme Court referring to the Jalan case, upheld a similar provision.

It is accepted that the law to remove difficulties is not excessive delegation and is very much legal, but the question is what is ‘removing of difficulties'? Can the babu amend the Act in the name of removing difficulties?

Law-making is unfortunately not given the kind of importance it deserves.

Customs - New Exchange Rates from Today

CBEC  has notified new exchange rates for Imported Goods and for Export Goods with effect from 3rd July 2015. The US Dollar is at 64.25 rupees for imports and 63.20 rupees for exports.

Notification No.66/2015-CUS(N.T.), Dated: July 02, 2015

Re-export of unsold rough diamonds from SNZ – RBI Instructions

IN order to facilitate re-export of unsold rough diamonds imported on free of cost basis at Special Notified Zone of Customs (SNZ), RBI has clarified that the unsold rough diamonds, when re-exported from the SNZ (being an area within the Customs) without entering the Domestic Tariff Area (DTA), do not require any Export Declaration Form (EDF) formality.

Entry of consignment containing different lots of rough diamonds into the SNZ should be accompanied by a declaration of notional value by way of an invoice and a packing list indicating the free cost nature of the consignment. Under no circumstance, entry of such rough diamonds is permitted into DTA.

For the lot/ lots cleared at the Precious Cargo Customs Clearance Centre, Mumbai, Bill of Entry shall be filed by the buyer.

AD bank may permit such import payments after being satisfied with the bona-fides of the transaction.

RBI Circular A P (DIR Series) 01/RBI., Dated: July 02, 2015

FTP - Amendment in Area of operation of Pre-Shipment Inspection Agencies

DGFT has amended the Appendix-2G of Appendices and Aayat Niryat Form of FTP 2015-20 amending the Area / Region of Operation of some PSIAs.

All the PSIA listed in Appendix 2G are allowed time upto 31.07.2015 to submit Bank Guarantee as prescribed in Public Notice No.21 dated 23.06.2015 read with Public Notice No. 19 dated 05.06.2015.

DGFT Public Notice No. 24/2015-20., Dated: July 02, 2015

Child Care Leave - Income Tax Department in appeal against own employee

A Tax assistant in the Income Tax Department applied for ‘child care leave'. Instead of giving leave, her bosses asked for her explanation in a memo. She approached the Tribunal. The Central Administrative Tribunal observed,

If Child Care Leave under the Rules is denied to the applicant, till her son attains the age of 18 years, the very purpose and object of introducing this welfare scheme will stand defeated. The object behind the scheme cannot be nullified by an act of executive, which is not the intention of rule framing authority.

Fairness, in our opinion, is a fundamental principle of good administration. It is a rule to ensure that the vast power in the modern State is not abused but properly exercised. The State power is used for proper and not for improper purposes. The authority is not misguided by extraneous or irrelevant consideration. Fairness is also a principle to ensure that statutory authority arrives at a just decision either in promoting the interest or affecting the rights of persons. To use the time-hallowed phrase that "justice should not be only be done but be seen to be done" is the essence of fairness equally applicable to administrative authorities. Fairness is thus a prime test for proper and good administration.

The Tribunal directed the Department to act strictly in accordance with the DOPT OM dated 11.09.2008 as amended/clarified on 29.09.2008 and 18.11.2008 and to sanction the Child Care leave applied by the applicant on 28.8.2013 and issue a regular sanction proceedings from 10.09.2013.

The Union of India represented by the Commissioner of Income Tax was aggrieved by this order of the CAT and took the matter in appeal to the High Court.

The High Court observed,

The only direction issued by the Tribunal was to direct the petitioners to act strictly in accordance with DOPT OM dated 11.9.2008, as amended by subsequent letters and to sanction child care leave. We do not know how the Union of India can be aggrieved by such a direction to the petitioners to act strictly in accordance with the office memorandum dated 11.9.2008.

It is not the case of the petitioners that child care leave is something which is unheard of. It is not the case of the petitioners that the leave application was rejected. Therefore, the order passed by the Tribunal does not call for any interference. Hence, the writ petition is dismissed.

It is not known whether the Department is considering an appeal to the Supreme Court.

Please see 2015-TIOL-1532-HC-MAD-SERVICE

ED attaches property in USA

IN twitter, the Enforcement Directorate announced that:

ED Indore attaches under PMLA 1280 Acres of Land in California, USA of Zoom Developers Pvt Ltd and Vijay Choudhary in bank fraud case.

All the newspapers picked up the story today.

WCO Photo Competition 2015 - China Entry

Until Monday with more DDT

Have a nice weekend.

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