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TMI BlogShould we abolish courts and institutes of law and commerce? - Yes, if we go by the trends of revenue officers as well as amendments in tax laws. - Should we agree to what the tax officer want and ignore the law? Yes.X X X X Extracts X X X X X X X X Extracts X X X X ..... Should we abolish courts and institutes of law and commerce? - Yes, if we go by the trends of revenue officers as well as amendments in tax laws. - Should we agree to what the tax officer want and ignore the law? Yes. - By: - C.A. DEV KUMAR KOTHARI - Other Topics - Dated:- 2-3-2010 - - Summary: In view of the proposals in the Finance Bill 2010 regarding service tax on commercial rent, it can be said that there is no need to learn law and monitoring of law by courts. Because courts judgments can be nullified any time. The real question: The title of the article is kept in a question form, and this question is real problem our public is facing and the problem may become intense, if the trend is allowed to continue. Education of la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w: Various institutions like law institutes, ICAI, ICWAI, ICSI, provide wholesome education and training about laws in their courses. In course of graduation in commerce, engineering courses, medical courses, management courses some basic education about law is provided. For example, the author had some preliminary studies during his class IX to XII in the subject 'commercial practices'. In three years degree course of B.Com there was sufficient studies of law which provides insight into the basic fundamentals of a good law and its enforcement. According to such fundamental studies most important learning is that law is to be read as it stands at any point of time, no words can be added or omitted except in rare cases. The law must be wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hin authority of the law makers. During three all India courses of ICWAI, ICSI and ICAI also wholesome studies of law were made and basics of good law were reinforced. Everyone is assumed to know law biggest dillemma: The biggest dilemma is that every person is assumed to know the law. And excuse of not knowing legal position is generally not considered a good and sufficient excuse as cause for non compliance of law. Retrospective amendment in tax laws: The government has as a routine adopted mechanism to amend tax laws with retrospective effect. Such amendment are generally because of inactions and inefficiencies of revenue officers in compliance of legal procedure and taking timely actions. Every year there is whole some amendment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in tax laws through regular budget (Finance Act) and several other amendments are made from time to time, yet amendments with retrospective effect are taking place as a general routine to nullify the legal opinions of courts, judgment and orders of courts and opinions of legal professionals. The provision under study: In this study we are concerned with provisions relating to service tax on commercial rent. To cut short the issue and directly coming to the point it is suffice to say that when the tax on renting was proposed in the Finance Bill 2007, an article written by the author was published in the Service Tax Today (A Taxmann) publication) in MARCH 22,2007 PAGE 55 (Mag.). a renowned publication of Taxmann. The publication of arti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cle was during discussion and suggestions phase and much before the Finance Bill 2007 was enacted. Suggestions by the author on proposed charging section in the Budget 2007: When the budget 2007 was announced, the author had written above article and request was made to reconsider levy and some suggestions- make tenant, as service receiver liable to register and pay service tax". In the article author had made detailed observations on the budget proposals about service tax on commercial premises and expressed that only some of services in relation to renting can be brought in tax net as per proposed section. The author had also made suggestions for consideration of the Finance Minister, with highlight of the relevant suggestion in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is context, as follows: Request and suggestions to the Finance Minister: It is requested and suggested to the honorable Finance Minister to: Reconsider the proposal in view of constitutional validity and if found inconsistent with constitutional provisions and also inconsistent with the concept of service tax please drop the same. If found correct and desirable, to impose tax only on portions of buildings which are used for commercial purposes. To make the service receiver liable to pay service tax on service used. This will avoid revenue leakage. For example, suppose a building is owned by four persons who let out the same to a company each receiving rent of Rs.60000/- per month amounting to Rs.7,20,000/- per year. In this case a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll owners may be exempt from service tax. Whereas the tenant, if made liable to pay service tax, will have to pay tax on entire amount of Rs.28,80,000/- paid to four owners. In case of business organizations several properties are taken on rent from several owners. It would be difficult to monitor owners, instead of that tenants who are organized persons can manage tax affairs easily and it would be easy to monitor them. To avoid confusion words "by renting" can be used in meaning of taxable service as follows: "taxable service" means any service provided or to be provided - to any person, by any other person by renting of immovable property for use in the course or furtherance of business or commerce". This is because the words ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'in relation to renting' can be construed as service rendered to land lord or tenant in relation to renting of property and not the rent itself. Therefore, as per clause (e) of the above suggestions it is clear that the author had in clear terms indicated in his article that the scope of taxable services, as per proposed charging section can be construed to be restricted to services provided by any person to other person (likely to be land lords and tenants) only in relation to renting of properties and not renting of property itself. The author had also suggested proper language to be used in charging section. However, as usual our bureaucrats being overconfident had not taken care of such an important suggestion at right time. If all th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e suggestions put forth by author were incorporated in the law, the revenue could have gained substantially and without doubt. Delhi High court's judgment and subsequent legislation: The judgment in HOME SOLUTION RETAIL INDIA LTD. Versus UOI ORS. 2009 -TMI - 33136 /14) S.T.R. 433 (Del.), 2009 (237) E.L.T. 209 (Del.), 2009 (92) RLT 519 (Del.), [2009] 20 STT 129 (DELHI) was rendered on 18 April 2009 and it has wide publicity also. In this judgment the court has held that the notification is ultravirse the Act and there is no service, there is no value addition in course of renting out property. After this amendment Finance (No.2) Act, 2009 was introduced and enacted. However, no amendment was made in the law. Rather in complete dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard of the judgment of Delhi High Court, revenue attempted to collect tax on rent. Again Delhi High Court was approached and the high Court held that such attempt should not been made because any stay order has not been issued by the Supreme court against its judgment. After this now we find proposals in the Finance Bill to regularize all actions of the revenue and amend law with retrospective effect. Proposed amendment in the Finance Bill 2010: We find the following relevant proposals vide clauses 75 and 76 of the bill (with highlights provide): 75. In the Finance Act, 1994,- (A) in section 65 , save as otherwise provided, with effect from such date as the Central Government may, by notification in the Official Gazette, app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oint,- Xxx (h) in sub-clause ( zzzz ),- (i) for the portion beginning with the words "to any person" and ending with the words "business or commerce", the following shall be substituted and shall be deemed to have been substituted with effect from the 1st day of June, 2007, namely:- "to any person, by any other person, by renting of immovable property or any other service in relation to such renting, for use in the course of or, for furtherance of, business or commerce."; (ii) in Explanation 1, after item (iv), the following item shall be inserted, namely:— "(v) vacant land, given on lease or license for construction of building or temporary structure at a later stage to be used for furtherance of business or commerce;"; Valid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of action taken under subclause (zzzz) of clause (105) of section 65. 76. Any action taken or anything done or omitted to be done or purported to have been taken or done or omitted to be done under sub-clause (zzzz) of clause (105) of section 65 of the Finance Act, 1994 , at any time during the period commencing on and from the 1st day of June, 2007 and ending with the day, the Finance Bill, 2010 receives the assent of the President, shall be deemed to be and deemed always to have been, for all purposes, as validly and effectively taken or done or omitted to be done as if the amendment made in sub-clause (zzzz) of clause (105) of section 65 , by sub-item (i) of item (h) of sub-clause (5) of clause (A) of section 75 of the Finan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce Act, 2010 had been in force at all material times and, accordingly, notwithstanding anything contained in any judgment, decree or order of any court, tribunal or other authority,- (a) any action taken or anything done or omitted to be taken or done in relation to the levy and collection of service tax during the said period on the taxable service of renting of immovable property, shall be deemed to be and deemed always to have been, as validly taken or done or omitted to be done as if the said amendment had been in force at all material times; (b) no suit or other proceedings shall be maintained or continued in any court, tribunal or other authority for the levy and collection of such service tax and no enforcement shall be made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any court of any decree or order relating to such action taken or anything done or omitted to be done as if the said amendment had been in force at all material times; (c) recovery shall be made of all such amounts of service tax, interest or penalty or fine or other charges which may not have been collected or, as the case may be, which have been refunded but which would have been collected or, as the case may be, would not have been refunded, as if the said amendment had been in force at all material times. Explanation.—For the removal of doubts, it is hereby declared that no act or omission on the part of any person shall be punishable as an offence which would not have been so punishable had this amendment not come into force. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he suggestion of author is now implemented: From above amendment proposed vide clause 75 in section 65(105)(zzzz) one can notice that the suggestion which the author placed after the Finance Bill 2007 was circulated, is now finding place in the law. The way in which amendments are proposed, clearly shows that we need no education of law, and courts. Because the law is totally uncertain and one cannot read law as it stands at any particular time because it can be amended at any time in future. Looking at old published article author feels that his education in law was good and could be very useful if his suggestions were implemented on time. However, when we look at the amendment one has to be sad to know that there is no use of studies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in law and their application. Now author wonders as to Why he studied tax law? Is there any need to study law particularly tax laws? Why not to just follow what the tax officer want? - Reply By Shyam Naik as = It is the fruit of self governance bestowed upon the countrymen by our representative. Are we better off by the self governance? Is not independence a continuous struggle? Are not we, the citizen of India, accostmed and addicted to colonial rule? Does the lagest democracy gurantee an iota of respect for the tax payer? .... Dated: 4-3-2010 Reply By ALOKE GHOSH as = I have gone through the write up and really thanks for your on time comment on the subject. Practically it has become a practice of the incompetency for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which lakhs of tax payee have to suffered on each and every occassion whenever any court of law decides any matter against the Revenue/ or declare any provision as ultra vires, the instant effect of the same is reflected by mere amendments of the said provision giving retrospective effect. Thus, it has become meaningless for the country to maintain different Courts for which we, the tax payers have to suffer. Dated: 4-3-2010 Reply By CA UMA KOTHARI as = We have open economy even foreign investors and business persons have to face india law. Therefore law should be certain. A person is expected to read the law and have a reasonable interpretation. It is not necesasry for a general public to go into details of what could be hidden desire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Tax officers to interpret law in a manner that suit to them. When tax laws are revised thoroughly , at least once every year through the Finance Bill, any amendment should not go beyond the date when the last fiancne bill was proposed. We ahve noticed that on many isues the Supreme Court and High Courts have advised UOI and its officers to be careful in complying with statutory provisions, and to take actiosn timely and as epr legal procedure. however, for number of years such advice is not acted upon. Then when a larege number of proceedings are held invalid, due to such reasons- inactions, ommissions, and lapses on part of revenue officers as well as draftsmen of GOI, any time retrospective amendment is made. The things which were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered settled long ago are again unsettled and we people of India and also foreigners who had dealt with indians and indian Government, suddenly burdened with new liabilities and obligations. This is nto proper. There should, in fact, be complete bar on retrsopective amendments on tax laws. Readers are requested to send comments, views, write-ups on such issues repeatedly, then only perhaps a new thinking can come in mind of GOI and its officials. otherwise the attitude of 'who care... we can amend the law to rectify all mistakes at any time ' will continue and it will made the government and its machincery totally unreliable. Dated: 16-3-2010 - Scholarly articles for knowledge sharing authors experts professionals Tax M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anagement India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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