Governance

Disquieting Governance

There are some worrying aspects concerning laws relating to Income Tax, Companies Act and the recently enacted Insolvency & Bankruptcy Code, 2016

by TN Pandey

TAXI have been contemplating a short article on the disquieting nature of governance for some time. This desire got hastened after media reports sometime back that the I&B Ministry had to withdraw its guidelines on ‘fake news’ at the behest of the Prime Minister’s Officer (PMO. Such reports made me recollect some worrying aspects concerning laws relating to Income Tax, Companies Act and the recently enacted Insolvency and Bankruptcy Code, 2016 (IBC). I will initiate this discussion from the IBC because developments concerning this legislation are clearly indicative of the position that something is basically wrong with lawmaking in the country.

Insolvency and Bankruptcy Code
This Code was enacted in 2016 and its provisions were to be implemented from different dates – some from December 1, 2016, some from April 1, 2017 and some were still to be enforced, when the need for an amendment was felt. Accordingly, an ordinance to amend it was issued in November 2017, which was later converted into an Amendment Act in January 2018.



Table-1-Questionnaire-Drafted-by-Task-Force

While this process was on, the need for an entire review of the IBC was realised and a 14-member committee, headed by Secretary, Dept. of Corporate Affairs, was constituted for the purpose. This committee has given its report on March 26, 2018, suggesting a total revamp of the entire IBC, which was not in force even for one year. This shows total inefficiency of the part of those who conceptualised the law and those who drafted it. This state of affairs needs to be contrasted with those who drafted the Indian Penal Code (IPC), Code of Criminal Procedure (CrPC ), Indian Evidence Act, Transfer of Property and similar laws enacted more than a century back and are standing like rocks even till now. Changes in them have been made, which were necessitated by needs of time and not because of any conceptualisation or drafting deficiencies. A wholesale review of the IBC cannot be justified on the ground of problems coming into focus over time as the law was in force for very little time.

It is almost impossible to draft a new income-tax law in six months after considering nearly 800 sections, enormous CBDT’s circulars, notifications and case-laws running into volumes (402 ITRs). Such approach has led to considerable waste of time, energies and public money during Chidambaram’s time. It is being repeated again

Companies Act, 2013
The Companies Act is a legislation that has not been able to achieve any degree of stabilisation even after it was enacted as Companies Act, 2013, after series of deliberations spread over a decade. This Act too has not been made applicable from a single date – an infection catching up fast for no explicable reason. Further, this Act too has undergone frequent changes from April 1, 2014 – the date of its coming into force. Apart from small frequent amendments after its enactment, a ‘Companies (Amendment) Bill, 2017, was recently moved, comprising of 93 clauses substantially amending the Companies Act, 2013. Such frequent changes do not indicate good governance at all.

Table-2a ; Suggestions on existing provisions

Income Tax Act, 1961

Attempts to amend the Income Tax law and bring new short, simple, easy to administer Income Tax provisions for the country have been on since almost two decades and have not succeeded in enacting a robust I-T law for the country.



Another disheartening development regarding the I-T law has been obtaining experts’ views on subjects relating to income tax, keeping the same in cold storage and not releasing it for public debate though considerable public money has been spent on the bodies who prepared such reports. Some instances are:

  • The UPA Government entrusted the task of making studies and report on various aspects of money laundering, unaccounted income and wealth (black money), etc., to three premier Institutions of the country, namely National Institute of Public Finance & Policy (NIPFP), National Council for Applied Economic Research (NACER) and National Institute of Financial Management (NIFM) in 2011. Their reports were received sometime at the end of 2013. The UPA did not act on these reports when it was in Government and thereafter, since May 2014, the present Government is just keeping these reports unpublished.
  • The NDA Government constituted a 10-member tax committee, headed by a retired High Court Judge of Delhi HC, RV Eshwar. This committee gave its final report in December 2016 and the Government is yet to release this report for public debate.
  • Regretfully, it is not only the Government keeping such reports on the back burner. Even the Supreme Court has not released any reports of the SIT looking into the pay allowances and perquisites admissible to working SC judges. The SIT is working under the close supervision of the Supreme Court for over four years now. This SIT is headed by two retired judges of the Supreme Court and 13 senior members from the Government such as CBI, DRI, CBDT, RAW, etc.

Table-3-Details-of-Task-Forces-and-Committees

Much hopes were pinned on the new NDA Government for coming up with a new simplified, redrafted I-T Act, but regretfully, it too has greatly disappointed, acting on the lines of the previous UPA Government.



Even as the Insolvency and Bankruptcy Code, 2016 was being amended, a need was felt for an entire review of the legislation. The review committee has recommended a total revamp!

BY an Office Order dated November 22, 2017, the CBDT has constituted a Task Force with Arvind Modi, Member (Legislation), CBDT, as Convener [the third one during the three-and-a-half rule of the NDA) “….to review the existing Income Tax Act, 1961 and to draft a new Direct Tax Law in consonance with the economic needs of the country…”. This Task Force has no Chairman and has remained dormant for nearly four and half months. Since it was constituted, it has issued a questionnaire, seeking public opinion in the manner as UPSC or CAT conducts examinations to eliminate examinees by way of ‘Preliminary Exams’. I am giving below a sample of few questions as instances to support the view expressed earlier (see Table 1).

I consider the position adopted as most unsatisfactory way of soliciting public participation for the new I-T Act in the way it has been done. The propriety of ‘NA’ in the context is not understandable. To say the least in regard to information being solicited through a proforma, the same could have been better drafted as suggested in Tables 2a and 2b.

CBDT’s circularsAnother area is the irrationality in the appointment of Task Forces and Committees. Here too there has been no focus so as to work out the terms of reference, what is expected from the expert bodies being appointed, what is expected to be the workload with the task force or committee being appointed, what should be the realistic timeframe for the body to complete its deliberations and submit the report and what infrastructure would be needed to enable the body to work effectively and within the time limit. Regretfully, no thoughts are given to these essential aspects while appointing the expert bodies as can be seen from the data in Table 3.

Table 3 clearly gives an account of how arbitrarily and in hurried manner such bodies are constituted and tasks assigned to them.

CONSTITUTION of task forces, committees and commissions is a responsible job to be performed with great care and caution, but is being rather casually undertaken without properly doing the requisite homework. It is almost impossible to draft a new income-tax law in six months after considering nearly 800 sections, enormous CBDT’s circulars, notifications and case-laws running into volumes (402 ITRs). Such approach has led to considerable waste of time, energies and public money during Chidambaram’s time. It is being repeated again.

The instances given are merely the tip of the iceberg. There are many more, which have not been stated because of constraint of space. Such disquieting features in the governance of the country are extremely worrying. gfiles end logo

The writer is former Chairman, CBDT

GOVERNANCE / Legislation / TN Pandey



VOL. 12 | ISSUE 2 | MAY 2018

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