Section 37(1) of the Income Tax Act, 1961 allows such expenses against the taxable business profits, which inter alia are not personal expenses and are incurred wholly and exclusively for the purpose of business. There are certain types of expenses which on the face of it appear to be personal expense or at least an expense not incurred wholly and exclusively for the purpose of business. Such expenses invite incisive inquiry during the course of assessment proceeding. One such expense is the expense incurred by an assessee carrying on the business, on the higher education of the son(s)/daughter(s) of the directors/partners/proprietor and which is claimed as deduction by that assessee against the taxable business profits. Attempt of the Revenue remains to find holes in the explanation furnished by the assessee during the course of assessment proceeding showing the business nexus of the said expenditure and to disallow it. Once the expenditure so claimed is disallowed in assessment, matter is taken into appeals at various stages with all sorts of uncertainties creeping in. In fact such claim is a sensitive claim from the stand point of the Revenue and if such claim is disallowed, such situation is fraught with severe consequences for the assessee.

1. Penalty u/s 271 (1)(c) cannot be levied in respect of an addition made u/s 50C – Calcutta High Court decision in the case of CIT vs. Madan Theatres Ltd. (www.itatonline.org).

The facts of this case were that the assessee sold property for a consideration of Rs. 2.50 crore. However, for the purpose of stamp duty, the property was valued at Rs. 5.19 crore and stamp duty was paid on that value. In its return of income, the assessee declared capital gains on the basis of the sale consideration of Rs. 2.50 crore. The Assessing Officer, invoking the provisions of section 50C, held that the transfer consideration has to be taken at Rs. 5.19 crore and computed the assessee’s capital gains on this basis. The Assessing Officer imposed penalty u/s 271(1)(c) in respect of the capital gains’ income enhanced in the assessment. The penalty was however deleted by the Commissioner (Appeals) and the Tribunal.

Recently, Hon’ble Delhi High Court was seized of, inter alia, the matter under consideration in a case where one Sri Anand Prakash, FCA addressed a letter to the Hon’ble High Court raising various issues facing the helpless assessees and claimed that because of the fault of the department, assessees are being harassed. The Hon’ble High Court took judicial notice of the letter, converted it into a PIL and made CBDT a party. The said case has now been reported as Court On Its Own Motion vs. CIT 352 ITR 273 (Del.)

The controversy over whether the Government should spare Vodafone of the tax of Rs. 19,000 crore that the retrospective amendment seeks to recover from it has polarized the intelligentsia. While, on the one hand, Ex Chief Justice S. H. Kapadia has spoken out in favour of Vodafone and suggested that if the Government is harsh on Vodafone, thousands of jobs could be jeopardized, on the other hand, (late) Ex Chief Justice J. S. Verma had expressed the view that Vodafone had attempted to evade taxes and should not be spared.

Vodafone is destined to be a saga of never-ending controversy. The raging controversy at the moment is whether the newly appointed Law Minister Kapil Sibal was justified in overruling the decision of his predecessor Ashvini Kumar on the grant of amnesty to Vodafone over its’ tax liability of Rs. 19,000 crore.

It is worth appreciating that the tax professionals send the pre-budget representations very objectively for the consideration of Honourable Finance Minister, however the Honourable Finance Minster or his team to the reasons best known to them does not interact or send invitation to the tax professional organizations while in the process of preparing the Finance Bill.

1. Introduction

A great Indian statesman and philosopher ‘Chanakya’, variously described as a ‘Kingmaker’, ‘Ruthless administrator’ etc., courted controversy when he said-

‘The ends justify the means’ and

‘The ruler should use any means to attain his goals. His actions require no moral sanctions’.

But when it came to framing of tax laws and collection of taxes, he made a very sober statement-

‘Ideally, governments should collect taxes like a honeybee, which sucks just the right amount of honey from the flower so that both can survive’.

But the Government of India while framing the tax laws is conveniently forgetting the later maxim and seems to be laying emphasis on the former one.

"Taxation is the price which civilized communities pay for the opportunity of remaining civilised."

— Albert Bushnell Hart, Actual Government, 1903

Tax patently appears to be an individual liability. Examined objectively, it is an investment for development and for the good of the society. I am very happy that the All India Federation of Tax Practitioners has chosen me to engage in a deep and mutually enriching dialogue with Indian Tax Professionals. I assure you that your interest in Indian taxation jurisprudence will provide you with a unique and stimulating journey, through the realms of abstract philosophy and also right up to the challenging ground realities of developmental concerns.

Good Evening to all. I am grateful for inviting me to inaugurate the National Seminar at Radhika Beach Resort, Diu. Diu is a famous tourist destination and the weather is pleasant. At the very outset, I wish every success of this National Seminar 2013 at Diu which is organized by All India Federation of Tax Practitioners, Mumbai and All Gujarat Federation of Tax Consultants, Ahmedabad jointly with Rajkot Tax Consultants Society, Jamnagar Tax Practitioners Association and Taxation Association, Junagadh.

Recovery is one of the most important subjects in direct taxation, of which all of us are very much concerned in our day to day practice, either as consultants or while dealing with our own taxation matters. I must congratulate the President and his team for selecting a very appropriate subject at a very appropriate time, because maximum recovery proceedings are initiated in the month of January, February and March every year.