What if I say government takes 40 years to transfer money from one pocket to another pocket? We are not joking

Not particularly remarkable judgment but it will help us to understand important aspect of judiciary system in India

The assessee was the government-owned National Cooperative Development Corporation (NCDC), Its main business was to advance loans or grant subsidies to co-operative societies, out of funding from the central government.

The general rule under the Income tax Act is that, all revenue receipts are taxable unless specifically exempted and all capital receipts are exempt from taxation unless there is a provision to tax it. Gifts and loans etc. are in the nature of capital receipts not attracting tax.

The funds so received from the central government were a capital receipt, and therefore not chargeable to tax.

The interest received by the NCDC on loans advanced by it is chargeable as business income — again undisputed.

The dispute was only whether the interest paid by the NCDC to the government on funds received was allowable as a business expense.

It was simple case, if you ask any Chartered Accountant you will get confirmation stating that it is allowed as business expenditure, but it took 4 decades for judiciary to come to the conclusion that expenses is deductible

The problem we are highlighting is of mountain case pending in the Judiciary

The Economic Survey 2017-18 estimated that as of March 2017, there were 1.4 lacs pending tax cases, out of which 66 percent involved each less than Rs 10 lakh constituting a mere 1.8 percent of locked up value of the total pending cases.

What is even more surprising is that 90 percent of all of these petitions are filed by the department, while its success rate was under 30 percent

What is worth noting here is that it takes same amount of effort be it 1 lac dispute or 1 Cr dispute. Judge, Taxpayer, various authorities spend same amount of time

A scheme was introduced as Faceless Assessments in Sep 20, where the officer will be blind to the taxpayer.

Assessment orders will have to be approved by a superior. This will inject accountability at the earliest stage of the litigation itself.

However, tax officers caution, this could lead to even more chaos.

Under ‘Faceless Assessments’, the officer will have to make a decision entirely on the basis of the material that has been filed. It is quite likely that anything that is doubtful will be decided in the favour of Income tax department — this could mean even more cases, and longer time for resolution.

Well the easy solution is not to see taxpayers as who cheats to the department and also not to assess income tax officers on the basis of tax collection.

What is need is robust Tax Deduction at Source (aka TDS).

Source : Money Control. Read Detailed Article Here

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