The Hindu Business Line : Why make routine of a `last resort'

CLOSE on the heels of the Taxation Laws (Amendment) Ordinance, 2003, issued by the President in exercise of the power conferred by Article 123 of the Constitution in September, comes the second ordinance on the setting up of the National Tax Tribunal as per the National Tax Tribunal Ordinance issued on October 16, 2003.

Has the power to issue ordinance been appropriately exercised in these cases?

Article 123 in Chapter III of the Constitution relates to the legislative powers of the President. The article stipulates that that if at any time, except when both Houses of Parliament are in session, the President is satisfied that circumstances exist which render it necessary for him to take immediate action, he may promulgate such ordinance as the circumstances appear to him to require.

The important words in Article 123 are "is satisfied" and this satisfaction requires that the President should ensure that circumstances exist which render it necessary for him, on the advice of the council of ministers, to take immediate action.

The circumstances leading to issue of ordinance is justifiable and this view was supported by the Supreme Court in the A. X. Roy vs Union of India (AIR 1982 SC 710) (paras 27, 29) case. Hence, an ordinance can be challenged on the plea that no grounds existed for its issue and the satisfaction was not objectively reached.

In the case of the two ordinances, no such circumstances are there for taking recourse to Article 123 by the President.

The first ordinance of September 8 relates to amendments to the I-T Act 1961, which include:

Exempting interest payable to Nordic Investment Bank in regard to a loan for a project approved by the Central Government on the basis of a memorandum of understanding entered into with the bank on November 25, 1986.

Why a decision for exemption needs immediate action through an ordinance is difficult to understand.

Exempting profits arising out of an undertaking exporting handmade articles or things of artistic value, by using wood as the main material (new Section 10BA in the I-T Act).

Adjusting interest rates regarding interest payable to taxpayers and chargeable from them where the assessees are to pay interest. In such situations, the rates have been reduced to 12 per cent from 15 per cent (in eight circumstances), and where they are to receive it, it has been reduced from 8 per cent to 6 per cent (in four situations).

Amending Section 206C relating to collection of tax at source; and

Some amendments relate to Section 272A (penalty for furnishing delayed returns etc.)

In short, none of the changes required presidential ordinance.

The ordinance to set up a National Tax Tribunal is hurriedly conceived as well. When the country could manage without such Tribunals for so many years, it could have as well waited for few more weeks for Parliament session to begin.

The provisions are to come into effect from the date the NTT is established. The ordinance does not have any immediate effect and could have easily waited till Parliament met. Such instances indicate misuse of the extraordinary measure contained in Article 123, eroding thereby the confidence of the public in the Government's functioning.

Presidential ordinance should be used as a last resort, to be invoked in extraordinary situations and not to usher in changes of a routine nature. Any ordinance to make major changes to appeals with regard to direct and indirect tax matters should require careful thought, deliberations and discussions.

Both the ordinances, prima facie, show improper use of Article 123.

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