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  1. An open letter to the Finance Minister: End taxman’s pointless appeals

An open letter to the Finance Minister: End taxman’s pointless appeals

It disrupts the business and entrepreneurial atmosphere, thereby spooking investors

Updated: February 6, 2015 4:33 AM
Arun Jaitley, Arun Jaitley news, Arun Jaitley finance minister

Finance Minister Arun Jaitley speaks during the session ‘An Insight, An Idea’ at the World Economic Forum annual meeting in Davos, Switzerland. (PTI)

Dear Sir,

Thank you ever so much for heeding the advice of the attorney-general of India and deciding not to appeal the recent transfer-pricing judgment of the Mumbai High Court. Press reports suggest that the income-tax (I-T)department was, in fact, keen to appeal. As a tax-paying citizen of this country, I am delighted that you have chosen to ignore and overrule the I-T department. It is the department’s typical ploy—of first making absurd claims on tax-payers, and then refusing to accept defeat gracefully. The department keeps up the endless cycle of appeals. Lower officials literally blackmail their seniors with the argument that if appeals are not made, then surely the seniors will be suspected of colluding with the assessee. This strategy virtually paralyses even those seniors who have impeccable records of integrity. They go along with an endless appeals process, even when they know, in their heart of hearts, that the department’s case is weak and flimsy. This approach of not giving a chance to the early and graceful closure of open issues, instead keeping them alive forever and a day, is one of the major reasons why India is placed so low in the international rankings of business environments. This albatross of procrastination and delay that we carry on our shoulders as a country inhibits domestic investment and growth—forget about what it does to foreign investors. You are known to be a person of integrity, as is our prime minister. It is fitting that you have exercised your right to overrule the income-tax officials, and have dared them or anyone else to resort to trivial blackmail.

In fact, you must go a step further and announce that, going forward, any time the government loses a tax case in a tribunal (be it a case of direct or indirect taxes), there will be no appeal. Once you do this, the ability of lower officials to blackmail their seniors will automatically dissipate. And trust me—I speak as a businessman—this single decision will ensure that India will right away go up twenty places in the international rankings. As far as pending items in the high courts or in the Supreme Court are concerned, let them linger on—but let there be no more appeals of high court judgments that go against the government.

Your decision will be fiercely opposed by the lawyers, who have a convenient nexus with the appellant departments. There will bearticles and editorials in the newspapers alleging that this is all a conspiracy on the part of the rich to avoid paying taxes. Some of the most inspired and credible leaks will come from officials of the concerned tax departments themselves. My suggestion to you is: just ignore them. It is the gross misuse of the appeals process which is responsible for the clogging up of our otherwise robust judicial system and thereby frustrating virtually all citizens. Surely, good lawyers can get enough work—they do not need to rely on frivolous appeals that burden the courts.

You can then suggest to the prime minister that every ministry, not just the finance ministry, should adopt this procedure. I recently read a news report concerning our defence ministry—an Indian soldier died in Siachen some years ago; he had stepped away from his post in order to visit the facilities (such as there are in Siachen). He slipped on his way, fell and died. The defence ministry denied the soldier’s widow the pension she would have been entitled to if her husband had been on active duty. The ministry argued that as the concerned soldier had walked away for a few minutes from his patrol, he was at that time, in fact, not on active duty. Needless to say, the ministry lost this case at every level—in all tribunals and courts. After all, it is obvious even to a dimwit like me that being in the line of duty was the only reason the soldier was in Siachen at all. But the officials of the defence ministry, prompted no doubt by the fear of their subordinates that the seniors might be accused of colluding with the soldier’s widow(!), chose to fight this case all the way to the Supreme Court. Guess what, they lost again with the added insult of severe strictures against the concerned ministry. Judicial strictures do not seem to bother anyone. The original decision-making officials have long since retired or have been transferred or, perhaps, have even died. So, who cares if the courtnow criticises decisions made years ago?

Let me draw your attention to another news report. The department of education in Tamil Nadu has fought a case for years right through to the Chennai High Court (where, of course, they lost) in order to prevent a government-aided school from re-designating a gardener from the category of temporary worker to that ofpermanent worker, the gardener concerned having been employed for 20-plus years! I am not aware whether the state has chosen to appeal at the Supreme Court or not.

The refusal to gracefully accept defeat in the lower courts and tribunals, and dragging the hapless citizenry through numerous appeals shows the Indian State as a cruel and uncaring tyrant. It clogs up our judicial process. It disrupts our business and entrepreneurial environment. It is completely self-defeating. The savings theoretically made by the government, or the so-called revenue lost,are trivial compared to the scale of loss of trust and respect. The argument that the lower courts and tribunals can be arm-twisted by influential persons is an insult to the institutions of India. It is also refuted by the frequent government defeats in the highest court of the land.

Sir, just get your government departments to stop “appealing”. This one act can transform our economy, our states and our country.

Sincerely yours,
Jaithirth Rao

The author is a Mumbai-based entrepreneur

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