The Hindu Business Line : Indian Merchant Chamber seeks withdrawal of `disturbing' proposals in Budget

THE Indian Merchants Chamber has appealed to the Prime Minister and the Union Finance Minister to withdraw some of the "disturbing" proposals in the Union Budget.

According to Mr Nanik Rupani, President, Indian Merchants Chamber, these proposals, if enacted into a law, would cause great hardship to everyone. "While seeking to curb unaccounted money, these proposals may in fact result into creation of more unaccounted money,'' he said.

The memorandum, submitted earlier this week, deals with numerous provisions such as the levy of fringe benefit tax, banking transactions tax, depreciation on plant and machinery, derivatives trading transactions, carry forward and set-off of losses in speculative business, deductions in respect of LIP, contribution to PPF, reduction in rate of tax in case of royalty/fees for technical services and TDS, and effective date of surcharge and TDS.

Citing some of the harmful provisions, the chamber said the rationale for introducing Section 115WA to Section 115WL in Chapter XII-H for levying fringe benefit tax (FBT) on employers is the inherent difficulty in isolating the personal element where there is a collective enjoyment of such benefits by the employees and attributing the same directly to the employee.

"The anomaly is most glaring, especially in cases where expenditure incurred by the employer is ostensibly for the purpose of business, but includes in part a benefit of a personal nature. The Government's assurance that no legitimate business expenditure would be taxed under the guise of FBT does not hold water, as Rule 3 of IT Rules, which provides for valuation of perquisites at the hands of employees in respect of different items, was amended by a notification on February 28," Mr Rupani said.

Observing that all the assessees covered by the provision would suffer great hardships, the chamber President pointed out that the new provisions sought to levy FBT on all those doing a business or practising a profession.

Mr Rupani suggested that the new FBT provisions should be applied only to those employers who satisfy the following conditions: The employer is liable to get his accounts audited under Section 44AB for the assessment year immediately preceding the relevant assessment year, or the aggregate expenses on salaries of employees (excluding wages of workers factories, mines, earning less than Rs 1 lakh per annum) exceeds Rs 20 lakh in the financial year immediately preceding the previous year relevant to the assessment year, or the aggregate number of employees (excluding factory workers) exceed 20.

The proposal to tax every cash withdrawal of Rs 10,000 or more is harsh. Mr Rupani suggested that the provision be dropped. He added that withdrawals made specifically for meeting pre-disclosed business necessities and for medical needs should be specifically exempt. The limit for attracting tax should be increased to Rs 25,000, he said.

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