The Hindu Business Line : Assocham for review of penalty clause in Cos' Bill

THE Associated Chambers of Commerce and Industry of India (Assocham) has called for review of penalty Chapter, introduced in the draft Companies Bill 2004, for non-compliance of some of the provisions of the Companies Act, arguing that it confers absolute powers on authorities for imposing stiff penalties.

In addition, it has also demanded withdrawal of the circular by the Central Board of Direct Taxes (CBDT), empowering tax inspectors to attach properties for non-payment of unreasonable tax demand.

In a statement, the Assocham President, Mr Mahendra K. Sanghi, said the Department of Company Affairs (DCA) has incorporated a separate Chapter in the draft Companies Bill 2004 for framing rules and prescribed conditions for imposing stiff penalties, the volume of which has been enlarged to an extent that its impact will not be bearable by the corporates.

He pointed out that as on date, there are multifarious acts, rules and regulations, having bearing on the functioning of the listed companies as well as regulations issued from time to time by the Securities and Exchange Board of India and the DCA. Since, there is no harmony between some of the provisions of these acts, the corporates find it difficult to comply said Mr Sanghi adding that there should be one extensive regulation to help industry and government go hand in hand.

Referring to the CBDT circular, the Chamber Chief while appreciating the Government's perspective for exploring ways to tap huge arrears of tax dues, expressed concern that it will open new vistas for harassment.

The extensive powers given to officials, Assocham apprehends may lead to greater misuse as the circular stipulates that the tax officials will be held responsible if a tax demand is not recovered due to the failure to follow the guidelines.

While it is true that direct tax arrears worth Rs 87,000 crore are outstanding, this circular is unlikely to boost the Government's tax revenue as major part of tax arrears are locked up in appellate proceedings.

On the issue of Foreign Direct Investment (FDI), Mr Sanghi felt that India is currently having an investment to GDP ratio that is lower than its saving ratio. In a sense, our savings are financing creation of assets abroad rather than building up wealth within India.

Therefore, India needs to harness the FDI potential to the fullest extent possible as use of foreign funds definitely overcome the limitations of domestic capital adequacy and multipliers from such investment activity not only benefit the sector directly but also the rest of the economy.

The Indian industry is aware that the Left parties have themselves recognised the role of FDI in promoting the economic progress of West Bengal. The opposition for FDIs limit hike is not rational particularly in the sector of civil aviation, insurance and telecom, as that will lead us to isolation.

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