It seems that the
Income-tax Department has not realized that computerization and e-filing of tax
returns requires much more timely action and accuracy while notifying the
various forms. The latest problem faced has been in relation to the format of
tax audit reports. Tax audits are required to be completed by end of September.
Most large companies with a number of branches start the process right from
April, and get the tax audit of branches completed, which is then compiled and
completed for the company as a whole, and thereafter e-filed. This year, the
Central Board of Direct Taxes (CBDT) changed the format of the tax audit
reports in the last week of July. The new format requires compilation of
substantially more information. This would require a fresh audit in cases even
where audits have already been completed, and would take much more time. When
this was pointed out to the CBDT, the due date for completion of audit and
e-filing of the tax audit report was extended—but not the due date for filing
of the returns of income. Computation of income is invariably based on the tax
audit reports, and therefore, logically, the income computation required for
filing the return of income would not be complete without the tax audit
reports. Even when this was pointed out to the CBDT, it refused to extend the
due dates for filing the returns of income, resulting in writ petitions being
filed all over India. High courts have extended the date, but have also asked
taxpayers to pay interest for the delay. Whose action caused the problem in the
first place, and who bears the brunt of such action? Could not the CBDT have
simply notified the modified formats in March itself, and saved everybody time
and effort, and loss of productive man-hours? Also, should not all the
income-tax return forms be readily available by end-March itself, so that
taxpayers can file their returns immediately if they so wish? Unfortunately,
taxpayers are taken for granted, and the tax department thinks that taxpayers
have no work other than compliance with tax laws. That is why the scope of tax
deducted at source (TDS) is so wide; far wider than in any other country. The
cost of tax compliance in India is very high. Tax authorities boast about the
low cost of tax collection. It is bound to be low, given that most of the work
has been outsourced to taxpayers, who have to do all the data entry for the tax
department. This attitude of taking taxpayers for granted, with no
accountability for the tax department, is one of the major factors impeding
business growth in India. E-tax return forms are also often designed in such a
manner that they leave no scope for a taxpayer to make a disputed claim. There
are many issues on which courts have taken a view different from that of the
tax authorities. The forms have an inbuilt computation mechanism for many such
items, whereby a taxpayer has no choice but to follow the tax department’s view
in filing the return. With e-filing mandatory, a taxpayer wishing to take a
contrary view has to find an innovative way of filing the return, so that she
can make the claim! Is this a way of maximizing tax collection without having
to amend the law? For instance, for charitable trusts, corpus donations are
treated as part of income in the return of income. The matter is before the
courts, and quite a few courts and tribunals have taken the view that these are
capital receipts and not income. Similarly, tax treaties provide for a maximum
rate of tax for certain types of income of non-resident Indians. Tribunals have
held that such rates are inclusive of surcharge and education cess. However,
the tax forms automatically compute surcharge and education cess in all such
cases, resulting in a higher tax liability. Here’s another instance: the tax
authorities have created a dispute as to whether a foreign company, which has
only investments in India and has earned exempt capital gains and has otherwise
no presence in India, is liable to minimum alternate tax (MAT) on its book
profits, though it is not required to maintain books of account in India. The
tax returns are often treated as defective if the balance sheet and profit and
loss account is not filled up in the return. If this is filled up, it results
in an automatic computation of MAT liability, even though the taxpayer wishes
to claim that there is none. Sometimes, the formats of the returns are not at
all in accordance with the law. For instance, in the return for charitable
trusts, they have to fill in computation under various heads of income, before
claiming exemption for the amount spent for charitable purposes, though the law
is clear that the exemption precedes the computation under the heads of income.
A determinate private trust ends up with computation of tax at maximum marginal
rate, as against the slab rates applicable to it. Can one not expect at least
these basic things to be correct in the returns put out by the tax department?
Why do the forms have to be modified every year? Formats of tax returns and
audit reports are not public secrets. If they have to be changed, why can’t the
forms be drafted and put up for public comment in January itself? Can they not
be finalized by end of March after taking into account public feedback, so that
all the problems are sorted out? The least that taxpayers expect is simplified
compliance. Many taxpayers are put off, not by the tax rates, but by the
excessive and complicated compliance that they are subjected to. Simplified
procedures which are consistent over the years will result in happy taxpayers,
and happy taxpayers will hopefully result in better tax collections for the
government.
md.aquil alam
3rd
semester pgdm
Iimt college of
management
Source. Mint live
“Sale or commercial redevelopment of prime properties owned by AI
is stuck as either the lease agreement is not available or memorandum of
agreement with the concerned authorities needs to be reworked. We are
hopeful that these problems would be sorted out soon. We won’t go for a
distress sale,” a senior AI official said on the condition of anonymity.
