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Are Achche Din Here For Tax Payers?

Published on Wed, Dec 30,2015 | 18:39, Updated at Wed, Dec 30 at 18:39Source : Moneycontrol.com 

By: Ameet Patel, CA

“Achche Din” is a phrase that was popularised by Mr Narendra Modi himself. During his phenomenal campaign leading to his scintillating victory in the Lok Sabha polls of 2014, we saw numerous messages promising the advent of the proverbial good (happy) days if he was elected to power.

His first tweet after the election results were announced (and it was certain that he would be the next PM of India) was :

"India has won! भारत की विजय। अच्छे दिन आने वाले हैं।" 

So, we have been made to believe that because Mr Modi has been elected to power as the PM, India and Indians can look out for “Achche Din”.

Modi “bhakts” and Modi haters battle it out daily on social and mainstream media on this issue – have the Achche Din arrived in India or not?

As 2015 draws to an end, I am tempted to look back and try to assess whether the policies and actions of the Modi government during this year have, in any way, made a difference to the tax administration in the country. Tax is my bread and butter and therefore, it is only natural that, from a selfish perspective, I look at only this aspect of governance while doing an year-end review.

Have “Achche Din” arrived for tax payers in the country?

“Good” or “happy” is a relative term. What can be good for one may be bad for another. Alternatively, what is good for one may not be good enough for someone else. Beauty truly lies in the eye of the beholder. My way of looking at this issue is from a few specific angles.

Before the current government was sworn in, for a decade, we had a regime that was infamous for the following:
a)    Retrospective amendments to the law (after losing cases in the courts)
b)    Multiple new taxes (FBT, STT, BCTT) as well as carrying on of old taxes (WT)
c)    Thrusting a massive compliance burden on tax payers
d)    Unduly long delays in issuing refunds to tax payers
e)    Frivolous litigation on the part of the income-tax department – leading to huge backlog in pending appeals before various authorities
f)    Exaggerated and unreasonable assessments by officers
g)    Incredulous stands taken in various matters (e.g. MAT on foreign companies / FIIs; transfer pricing adjustment in case of Shell etc)

In the above background, let us see how the Modi government has fared in 2015 on these contentious issues.

BUDGET
At the beginning of 2015, we had the Budget which abolished the Wealth-tax Act. This is definitely a welcome move as it does away with one entire statute. The Wealth-tax Act was a tax for being rich and wealthy. It made a few people pay huge amounts only for holding certain assets (even if they yielded no income to that person). The Budget also saw the formal burial of the Direct Tax Code. This statute was in the making for 5 years. It saw multiple changes and kept on getting postponed. The uncertainty hanging over its enactment was not good for the tax paying community. Finally, the Finance Minister announced that he would not be pursuing the DTC. While nobody would object to a simpler and more rational law, the DTC as it evolved was far from being simple. In my opinion, the entire objective of the DTC was defeated by its language.

The Finance Minister also announced that he proposes to reduce corporate tax rate from the present 30% to 25% over next few years. A roadmap is being laid down to make this possible. During the year, we got news that several exemptions and deductions available to companies will be done away with shortly.

Another major Budget announcement was the deferment of the GAAR by 2 years. GAAR had created uncertainty and had added to the growing distrust amongst foreign investors and corporates in the Indian tax system. Deferment provides more time to the government to think about this thorny issue.

SIMPLIFICATION OF RETURN FILING PROCESS
2015 saw the introduction of the Electronic Verification Code (EVC) for e-filing of tax returns. This has done away with the need for obtaining a Digital Signature Certificate for many individual tax payers who can now e-file the return and yet not have to send the ITR-V form to the Central Processing Centre physically. This is wonderful and will save so much of paper. It also makes the process of filing simpler and faster.

REFUNDS
Having had a good experience with filing of returns, the small tax payers were in for another pleasant shock. An extremely welcome step taken by the tax department was to expeditiously process the returns filed for A.Y. 2015-16 and to issue the refunds along with interest within a few days of the returns being filed. Several tax payers were refusing to believe that they had got income-tax refund so quickly. In respect of Non Residents, apart from getting the refund with the interest, they have also been issued the TDS certificates for the tax deducted from the interest! With this move, the CBDT has not only won a lot of praise from the lucky tax payers (who got their refunds) but has also saved lakhs of rupees for the government in the form of interest. In the past, refunds were issued several months later. This resulted in pay out of interest on those refunds. With expeditious issue of refunds, the period for which interest has to be paid to the tax payers has been substantially reduced. This is definitely good news for us as a nation.

MAT ON FOREIGN COMPANIES / FIIs
On the issue of forcing foreign companies including FIIs to pay MAT in India, there has been an appreciable move on the part of the Finance Ministry in deciding to move an appropriate amendment in the next Budget to exclude foreign companies without a PE in India from MAT. At the same time, the CBDT has asked the field officers to close the pending assessments of FIIs based on the decision taken by the government on the MAT issue. Simultaneously, a clarification has also been issued to clear the uncertainty that was created in the past by issuing notices to the FIIs alleging that their tax returns were defective (on account of non-submission of Balance Sheet and P&L details in the ITR Form. Now, the clarification has gone a long way in soothing frayed nerves and telling the FIIs that what they had done in the past was not wrong and that their returns are not defective.

This kind of a perceived step down was unthinkable under the earlier regime.

REDUCTION IN LITIGATION
In professional circles, a scrutiny of a return is seen and believed to be the beginning of a nightmare for the concerned tax payer. Invariably, exorbitant additions / adjustments are made leading to high pitched assessment orders and huge demands. This in turn gives rise to appeals by the tax payers. In a large number of cases, because the additions are frivolous and unreasonable, they get deleted in appeal. This in turn leads to further litigation – this time by the tax department. Due to lack of accountability and responsibility, lakhs of appeals have got filed in the past and now, they are all pending for disposal before various tribunals and courts.

The CBDT has, to the astonishment of many, taken a decision to increase the threshold limits of tax impact for allowing tax department to go in appeal. Not only this, incredibly, the increased limits have been made applicable retrospectively and therefore all appeals that are pending and which do not qualify under the new limits will be withdrawn! To my memory, we have never had such an extraordinary step being taken by the tax department. This is bound to reduce the backlog as also reduce future litigation.

REDUCTION IN PAPERWORK
A recent notification from the CBDT has brought about welcome changes in the paperwork required for remitting funds abroad for legitimate business purposes. The previous government had unnecessarily made Form 15CA/CB mandatory even for those transactions which did not give rise to income taxable in India. The latest notification exempts import of goods and services as also remittances under the Liberalised Remittance Scheme from the rigours of 15CA/CB.

E-GOVERNANCE
In the past, it was felt that physical interaction between the tax payer and the officers provided a window for corruption to seep in. Taking this matter seriously, the CBDT has started a pilot project for e-assessments. The scrutiny will happen over emails. Notices will be sent electronically and tax payers can respond electronically. This is something that will need to be tried and tested extensively before a verdict can be delivered on its success. However, it is the intent of the government that is most welcome.

CONCLUSION
The drift of the above paragraphs may have already got to you (the reader). Going by all these developments in 2015, my answer to the question raised earlier on is a clear “YES”. Achche Din are definitely here for tax payers. However, let me clarify that most of what I have pointed out affects the small tax payers of the country. And therefore. they have every reason to cheer. As far as larger tax payers and corporates are concerned, there are still miles to go before they can sleep peacefully.

Several matters need immediate attention to usher in Achche Din for all categories of tax payers. POEM, ICDS, adjustments of old demands against genuine refunds, transfer pricing adjustments etc are some issues that are likely to give larger tax payers the maximum pain in 2016. So, for such tax payers, the wait for the promised Achche Din continues.

However, what needs to be appreciated is the intent of the government and the CBDT to change for the better. And on this front, I have no hesitation in complimenting the government. Anything well begun is half done. Let’s all keep our fingers crossed.

This column is sourced from the year end series of Bombay Chartered Accountants' Society - www.bcasonline.org

 
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