Special bench for tax cases is a good idea
Given the extraordinarily high number of tax cases in the Supreme Court (SC)—the 10,843 pending cases account for 18% of all pending cases in the apex court—the idea of creating a special bench to hear tax cases is one which should have been implemented a long time ago. The bench, with seasoned tax judges, will hear cases from Monday till Friday, and the move is expected to reduce the pendency of these cases that has also contributed to India’s image of being a tough jurisdiction to deal with. Indeed, given that many high courts have taken views on issues already dealt with by other courts, this is also something that needs to be referred to this bench—the tax department should try and club cases according to important points of law and ask the SC to opine on them since this will reduce litigation in other courts. The government is also helping by, in principle, deciding not to go on appealing all cases where high courts have already ruled—this was done recently, in the case of Vodafone and Shell where the Bombay High Court ruled against the taxman. Quick disposal of cases by a special bench will help reduce the uncertainty for both the taxpayer and the taxman besides clearing the air on arrears that the tax departments will be able to collect.
While the SC’s step will ensure final settlement of the tax cases pending for years, the government also needs to take measures to expedite the process in the High Courts and also at the tribunal and departmental levels. It would do well by drafting the National Tax Tribunal (NTT) Act to the satisfaction of the SC now as the apex court has struck down the 2005 Act. The NTT was envisaged as an intermediate court between the tax tribunals and the SC. But the power prescribed in the Act to allow NTT to decide on substantial questions of law, a privilege that was till now only vested in the courts, was why the SC struck it down. An appropriately reworked NTT can be a big help in cutting down around 4 lakh pending cases in the courts, with around R7.7 lakh crore of tax demands, due to the shortage of benches in most high courts. The government should also act on the Law Commission’s suggestion to remodel the Commercial Division of High Courts Bill 2010 as the Commercial Division and Commercial Appellate Division of High Courts and Commercial Courts Bill 2015, to create commercial divisions and commercial appellate divisions in high courts and commercial courts for adjudicating commercial disputes. Of the 32,656 civil suits pending in the five high courts with original jurisdiction in India, over half are commercial disputes, and have impacted India’s business atmosphere adversely. While these steps can help curb litigation to a large extent, the ultimate solution, as the Tax Administration Reform Commission has pointed out, lies in changing the taxman’s attitude and equipping him better to deal with tax matters in a more scientific manner with greater use of data analytics.