Govt sets up panel to simplify Income Tax laws

The government on Tuesday set up a 10-member committee, chaired by former Delhi High Court judge R V Easwar, to identify provisions in the Income Tax Act that “lead to litigation and impact the ease of doing business” for resolution early next year in the Finance Bill, 2016.

The government on Tuesday set up a 10-member committee, chaired by former Delhi High Court judge R V Easwar, to identify provisions in the Income Tax Act that “lead to litigation and impact the ease of doing business” for resolution early next year in the Finance Bill, 2016. However, the disputes arising from the 2012 retrospective amendment to the Income Tax Act aimed at taxing past cases of offshore transactions involving Indian assets are not explicitly referred to the committee. Companies like Cairn, Vodafone and Sanofi Aventis are facing tax demands for their offshore transactions based on the 2012 amendment.

The revenue department has asked the panel to submit the first of its reports incorporating as many recommendations as possible by January 31 so as to accommodate them in the next Budget. The committee will zero in on provisions and phrases in the Income Tax Act which are interpreted differently leading to litigation, suggest steps to simplify the law in light of existing jurisprudence and suggest alternatives to existing provisions to bring predictability and certainty without affecting tax base and revenue, the department stated in New Delhi.

Finance minister Arun Jaitley told reporters in New Delhi, “We have over the last few months been resolving a lot of past issues and now time has come to look at some provisions of the I-T Act, to look at how their drafting quality can be improved in order to avoid ambiguity so that everybody is certain as to what the Act itself says.”

The clarifications are relaxations issued by the Modi government in implementing the tax law have led to dropping of tax demands on several companies and foreign portfolio investors (FPIs). Large tax disputes with Vodafone and Shell involving valuation of share transactions with their foreign associates as well as the notices issued to FPIs demanding 18.5% minimum alternate tax in their trading income from India are among these.

The minister said the committee with one-year term has experts from both the government and private sectors and would be contributing regularly towards legislative changes in direct tax law. Homi Mistry, partner, Deloitte in India, said this was a step in the right direction and that taxpayers could expect to see certain measures in next budget to further streamline the tax laws. Besides the chairman, the panel includes former law secretary VK Bhasin, revenue officers Arvind Modi and Vinay Kumar Singh, Vinod Jain, Rajiv Memani, Rajiv Gupta, Mukesh Patel, Ajay Bahl and Pradip Shah as members.

Jaitley also launched the “e-Sahyog” pilot project on Tuesday, aimed at reducing compliance cost of tax payers by offering an online mechanism to resolve mismatches in I-T returns without visiting the Income Tax Office.