DIRECT TAX CODE 2010 - SOME SUGGESTIONS FOR SIMPLIFICATIONS AND WITH A LONG-TERM PERSPECTIVE.

[C.A. Uma Kothari]

Direct Tax Code:

As the name suggest and as per preamble to the Code this enactment will be a wholesome enactment in relation to levy, collection and recovery of direct taxes. As per the present Bill it covers Income-tax and Wealth tax. In future it may cover new levies in nature of other direct taxes, as had been our experience in the context of Income-tax Act, 1961.

Therefore, it is advisable that the provisions should be drafted with a long-term perspective to cover all direct taxes without any doubt or ambiguity and in a simple manner.

Habits have to be changed to read more complex provisions:

The Income-tax Act and Wealth Tax Act were complex, but were not so complex as would be the DTC is likely to be.

We find the Direct Tax Code has a changed scheme of drafting. Various related provisions are scattered at many places - the object and preamble, the clauses of provisions in sections, clauses for definitions, provisions contained in Schedules, another enactments and many things will still be prescribed by Rules and other notifications etc.

Even within definition clause complete definition is not give at one place. For example, we find definition of Finance charges in S. 314 (98) which includes any incidental financial charges and then we have to refer to clause (119) to find definition or meaning of 'incidental financial charges'. We also find definition or meaning of 'interest' in clause (140). Similarly we find definitions or meaning of various tax authorities scattered in many places of the DTC. It is suggested that all related words can be placed at one place for easy understanding of relevant provisions.

Insertions of other definitions with suitable modifications:

One of the purposes of DTC is simplification therefore; the drafting of the provisions should be in easily comprehensible manner and to provide related provisions at one place. Various definitions adopted and referred from other enactments like the Companies Act, FEMA, Co-operatives Act, Disaster Management Act, Information Technologies Act, etc. can be specifically incorporated in the DTC with necessary modifications, if required. This will also serve long-term perspective of DTC because a change or amendment in the respective enactment can be to serve a different purpose in future which may not be consistent with the purposes of DTC in future.

Direct Tax authorities:

As the enactment will be for all direct taxes, it is suggested that the designations of authorities can be made like 'Direct Tax Authorites'- Direct Tax Officer, Direct Tax Commissioner.

In the following table some illustrations have been given about suggested drafting of provisions:

 

Designation used  in the Bill	Suggested designation with abbreviation	Remarks
Section 127.  (1) The Central Government may appoint such persons as it thinks fit to be income-tax authorities.	127. (1) The Central Government may appoint such persons as it thinks fit to be direct tax authorities (DTA).
(2) Without prejudice to the provisions of sub-section (1), and subject to the rules and orders of the Central Government regulating the conditions of service of persons in public services and posts, the Central Government may authorise the Board, or a Director-General, a Chief Commissioner or a Director or a Commissioner to appoint income-tax authorities below the rank of an Assistant Commissioner.	(2) Without prejudice to the provisions of sub-section (1), and subject to the rules and orders of the Central Government regulating the conditions of service of persons in public services and posts, the Central Government may authorise the Board, or a Director-General, a Chief Commissioner or a Director or a Commissioner to appoint Direct-tax authorities below the rank of an Assistant Commissioner.
(4) The Board may, by notification, direct that any income-tax authority or authorities specified in the notification shall be subordinate to such other income-tax authority or authorities as may be specified in such notification.	(4) The Board may, by notification, direct that any direct-tax authority or authorities specified in the notification shall be subordinate to such other direct-tax authority or authorities as may be specified in such notification.
314. In this Code, unless the context otherwise requires —
22) "Assessing Officer" means the Income Tax Officer, Assistant Commissioner, Assistant Director, Deputy Commissioner, Deputy Director, Joint Commissioner, Joint Director, Additional Commissioner or Additional Director, who is vested with the relevant jurisdiction by virtue of direction or order issued under section 130 or any other provision of this Code;	22) "Assessing Officer" means the Direct Tax Officer, Assistant Commissioner, Assistant Director, Deputy Commissioner, Deputy Director, Joint Commissioner, Joint Director, Additional Commissioner or Additional Director, who is vested with the relevant jurisdiction by virtue of direction or order issued under section 130 or any other provision of this Code;
(25) "Assistant Commissioner" means a person appointed to be an Assistant Commissioner of Income-tax under section 127;	(25) "Assistant Commissioner" means a person appointed to be an Assistant Commissioner of Direct Tax under section 127;
(75) "Deputy Commissioner" means a person appointed to be a Deputy Commissioner of Income-tax under section 127;	(75) "Deputy Commissioner" means a person appointed to be a Deputy Commissioner of Direct Tax (DCDT)   under section 127;
(76) "Deputy Director" means a person appointed to be a Deputy Director of Income-tax under section 127;	(76) "Deputy Director" means a person appointed to be a Deputy Director of Direct Tax  (DDDT) under section 127;
(130) "Income-tax Officer" means a person appointed to be an Income-tax Officer under section 127;	(130) "Income-tax Officer" means a person appointed to be an Direct Tax Officer (DTO) under section 127;
(138) "Inspector of Income-tax" means a person appointed to be an Inspector of Income-tax under section 127;	(138) "Inspector of Income-tax" means a person appointed to be an Inspector of Direct Tax  under section 127;

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Statutory Provisions

DIRECT TAXES CODE, 2010

Appointment and control of income-tax authorities.

127. (1) The Central Government may appoint such persons as it thinks fit to be income-tax authorities.

      (2) Without prejudice to the provisions of sub-section (1), and subject to the rules and orders of the Central Government regulating the conditions of service of persons in public services and posts, the Central Government may authorise the Board, or a Director-General, a Chief Commissioner or a Director or a Commissioner to appoint income-tax authorities below the rank of an Assistant Commissioner.

    (3) Subject to the rules and orders of the Central Government regulating the conditions of service of persons in public services and posts, an income-tax authority authorised in this behalf by the Board may appoint such executive or ministerial staff as may be necessary to assist it in the execution of its functions.

    (4) The Board may, by notification, direct that any income-tax authority or authorities specified in the notification shall be subordinate to such other income-tax authority or authorities as may be specified in such notification.

CHAPTER XIX

INTERPRETATIONS AND CONSTRUCTIONS

Interpretations in this Code.

314. In this Code, unless the context otherwise requires —

22) "Assessing Officer" means the Income Tax Officer, Assistant Commissioner, Assistant Director, Deputy Commissioner, Deputy Director, Joint Commissioner, Joint Director, Additional Commissioner or Additional Director, who is vested with the relevant jurisdiction by virtue of direction or order issued under section 130 or any other provision of this Code;

(25) "Assistant Commissioner" means a person appointed to be an Assistant Commissioner of Income-tax under section 127;

   (26) "Assistant Director" means a person appointed to be an Assistant Director of Income-tax under section 127;

   (75) "Deputy Commissioner" means a person appointed to be a Deputy Commissioner of Income-tax under section 127;

   (76) "Deputy Director" means a person appointed to be a Deputy Director of Income-tax under section 127;

   (77) "Director" means a person appointed to be a Director of Income-tax under section 127;

   (78) "Director General" means a person appointed to be a Director General of Income-tax under section 127;

   (79) "director", "manager" and "managing agent", in relation to a company, have the meanings respectively assigned to them in the Companies Act, 1956;

(130) "Income-tax Officer" means a person appointed to be an Income-tax Officer under section 127;

(138) "Inspector of Income-tax" means a person appointed to be an Inspector of Income-tax under section 127;