On the occasion of the “Foundation Day” of the Tribunal, the author ponders over what can be done to improve the functioning of the Tribunal. Using his vast experience, he makes a check-list of the known problem areas which invariably result in adjournments & delays. The author implores professionals to be proactive in ensuring that speedy justice is delivered to the assessees. The author also gently reminds the Hon’ble Members of the immense power vested in them to do justice to the parties

The 25th January, 2012 will be the foundation day of the Income-tax Appellate Tribunal. The Income-tax Appellate Tribunal which was established on 25th January, 1941 will be completing the 71st year. When we enter 72nd year it is the time to look back and learn which are the areas which requires to be debated and implemented for better administration of justice, so that this mother Institution retain its glory as one of the finest institution of country. In the year 1988-89, the pendency before the Appellate Tribunal was 3,00,597 cases where as on 1-1-2012 the pendency before the Appellate Tribunal is only 60,241, out of which 18,193 appeals are pending before the Income-tax Appellate Tribunal Mumbai. (Refer page56) One must give deserved credit to the institution for making all efforts to reduce the pendency of cases. This is the only institution where the pendency has reduced where as all other courts and institutions the pendency of cases have been increasing every year. For better administration of justice delivery system before the Appellate Tribunal we make an appeal to professionals to consider the following check lists, which will help the Appellate Tribunal to deliver speedy justice:-

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The author goes ballistic over the Rolls Royce Plc vs. DDIT case and claims that Rolls Royce’s “timid surrender” against the damning findings of the AO proves that even marquee companies like Rolls Royce are not averse to pinching a few dollars from the exchequer of third world countries if they think nobody’s looking. Rolls-Royce must be prosecuted for tax fraud demands the author

The recent report in the Economic Times about how multinational companies were using their subsidiaries and affiliates to avoid taxes in India made for shocking reading even as a lot of readers reacted with disbelief and a sense that the author was exaggerating the issue.

However, the case of Rolls Royce Plc, UK vs. DDIT which ended in a whimper in the Delhi High Court, exposes the myth that marquee companies like Rolls Royce, with supposedly high governance standards, are supposed to above board when it comes to compliance with the laws of the foreign countries that they do business in.

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On the occasion of the Bombay High Court’s 150th Anniversary, the author pays rich tribute to the judicial independence and integrity of the Bombay High Court and recollects the stellar contribution of the tax professionals in bringing glory to the High Court. This is the time for all professionals to re-dedicate themselves to the cause of the Judiciary exhorts the author

The Bombay High Court, which was established on August 14, 1862 & entered into the 150th year on 14th August 2011. On this auspicious day a memorable function was held at Bombay High Court to mark the beginning of the sesquicentennial celebration of the Bombay High Court.

Bombay High Court as an institution has produced what can be described as galaxy of legal luminaries. The publication titled “The Bombay High Court -The story of building – 1878-2003”. In the foreword written by then Hon’ble Chief Justice of Bombay High Court Mr. C. K. Thakker reads as under “There are, too men who became legends in their own life times, perhaps most of all M. C. Chagla. The Lawyers from this Court have shone bright and long in the legal firmament: Sir Dinshaw Mulla, the doyen of Indian jurisprudence, Sir Jamshedji Kanga, Nani Palkhivala, H. M. Seervai, C. K. Daphtary, Sir Chimanlal Setalvad, Motilal Setalwad and others” – “As much as the Judges, it is the Bombay Bar that has given the Bombay High Court its unique culture and reputation. This is a Bar that is fiercely – even frighteningly – independent. It is unforgiving of moral and legal transgressions amongst itself and its judges and yet, strangely, is gentle Bar that adopts as its own every judge who sits here”.

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Get up to speed with the latest developments in the World of Tax. This week, the author wonders whether it is time to write an obituary for the DRP. Also another body-blow on the reopening front should shake the Babus of Aaykar Bhavan out of their reverie. And yes, don’t forget to tighten your seat belt because the CBDT Chairman’s missive on recovery might just prompt the AO to demand that you pay up that long outstanding arrear

Fasten Your Seat Belts – Its’ Recovery Time

The CBDT normally goes into “recovery & collection” mode in March when they have to report the figures of tax collection to the mandarins of South Block. So, the Chairman’s letter of 25th July telling his juniors that “focus” on “concerted efforts in certain categories may expedite cash collection” came as a bit of a surprise. However, it seems just to be more a case of saber-rattling rather than anything serious. The Chairman’s tone seemed quite casual. There was no sense of urgency in it. No words to shake the Babus of Aaykar Bhavan out of their reverie. His use of the words “I suggest” was significant. Also, the suggestions appear to have been casually made. The Chairman said “more than 20,000 crores have been stayed by courts/ITAT” and that “counsels should be advised to get the stay vacated” by bringing “the direction of the Supreme Court in the Vodafone case” to the notice of the concerned authority. Well, all that one can say politely and with humility is that a tutorial on the working of the Tribunal and the Courts may be in order! Meanwhile the ground reality is that assessees continue to enjoy unlimited stay from the Tribunal despite the clear legislative intent to the contrary. This is thanks to the blunders of the department (see Dear Department, Thank You For Giving Us Infinite Stay Of Demand). Mr. Chairman, can you do something to rectify this please?

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The author argues that the adverse outcome of the Aditya Birla Nuvo matter was the result of shoddy drafting of the JV agreements by AT&T’s lawyers which the department’s lawyers exploited to the hilt. But its too early to write an obituary for the India-Mauritius DTAA says the author.

The judgement of the Bombay High Court in Aditya Birla Nuvo vs. DDIT must have sent a chill down the spine of foreign investors hoping to escape tax in India by routing their investments through Mauritius.

On paper, Aditya Birla Nuvo had a seemingly cast-iron case. Like hundreds of foreign investors before it, AT&T USA set up a 100% subsidiary in Mauritius, funded it with enough capital and got it to invest in the shares of Idea Cellular.

So what if AT&T Mauritius was a dummy company with no operations worth its name. It had the ‘precious’ Tax Residency Certificate from the Mauritius tax authorities and that is all that was required to wish away all tax headaches as per the CBDT’s Circular Nos 682 & 789 dated 30.3.1994 and 30.4.2000 and the judgement of the Supreme Court in UOI vs. Azadi Bachao Andolan 263 ITR 706.

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The author raises the seminal question as to why, while the Tribunal has all the trappings of a Court, does it not have the power to punish for contempt. He cautions lower authorities that the lack of contempt power is no reason for not following the binding judgements of the Tribunal. He also makes a fervent plea to all practitioners to uphold the honour & dignity of the great Institution.

Under the Income tax Act, the Income Tax Appellate Tribunal is a final fact finding authority.  In Ajay Gandhi v B. Singh (2004) 265 ITR 451 Apex Court observed that “The Income tax Appellate Tribunal exercises judicial functions and has the trapping of a Court”. Apex Court in ITAT v V.K. Agrawal (1999) 235 ITR 175 has held that interfering with administration of justice of the Income Tax Appellate Tribunal will amount to contempt of Court. In an historic judgment then law secretary was held for contempt. It is now beyond doubt that the Income tax Appellate Tribunal has all the powers of Court. It can issue summons and  exercise all the powers vested in the Income tax authorities under section 131 of the income Tax  Act, hence any proceedings before the Income tax Appellate Tribunal shall be deemed to be judicial proceedings within the meaning of sections 193 and 228 for the purpose of section 196 of the Indian Penal code. The Tribunal shall be deemed to be a Civil Court for all the purposes of section 195 and Chapter XXXV of the Code of Criminal Procedure 1898.

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