Column: End taxman’s endless appeals

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Published: March 14, 2015 12:43:29 AM

An open letter to the finance minister on how the ill-considered appeals are affecting India’s business environment

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 department. It is a typical ploy of the department, of first making absurd claims on taxpayers and then refusing to accept defeat gracefully. The I-T 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 for early and graceful closure to open issues, but of keeping them alive forever and a day, is one of the major reasons why India is 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 I-T officials and dared them or anyone else to resort to trivial blackmail.

In fact, you could go one step further; in the final version of the Finance Bill at the end of the Budget session, you can include a statutory provision that, going forward, any time the government loses a tax case at the tribunal-level (be it a case involving direct or indirect taxes), there will be no appeal. Once you do this, the ability of lower officials to blackmail their seniors will automatically disappear. Trust me, and I speak as a businessman, this single decision will ensure that India will right away go up twenty places in the international rankings of business environments. As far as the 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 at the Supreme Court level.

Your decision will be fiercely opposed by the lawyers, who have a convenient nexus with the appellant departments. There will be articles and editorials in 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 that is responsible for the clogging up of our otherwise robust judicial system and 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 even go another step further. You can suggest to the prime minister, that not just the finance ministry, but every ministry should adopt this procedure. I recently read a press report about our defence ministry. It turns out that 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, 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 to even 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 a court criticises now some decisions made years ago?

Let me draw your attention to another news report. The Tamil Nadu government’s department of education has fought a case for years right up to the Chennai High Court (where of course they lost), in order to prevent a government-aided school from re-designating a gardener as a permanent worker from being a temporary worker—the worker concerned having been under continuous employment for over twenty years! I am not aware whether the state government has chosen or not chosen to appeal to the Supreme Court.

The refusal to gracefully accept defeat in lower courts and tribunals and drag the hapless citizens through appeal after appeal shows the Indian state as a heartless, 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 loss of trust and respect that happens. The argument that lower courts and tribunals can be arm-twisted by rich and influential persons is an insult to the institutions of our country. It is also refuted by the frequent defeats of the government in the highest court of the land.

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

Sincerely yours, Jaithirth Rao

The author is a Mumbai-based entrepreneur

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