The Hindu Business Line : `I-T sop for salaried class with rider needs relook'

THE additional condition of payment "out of income chargeable to tax", in the new Section 80C, as proposed in the Finance Bill 2005 has caused widespread resentment among individual taxpayers, particularly the salaried class.

Tax experts and heads of taxation in big corporates feel such a rider "makes us wonder whether we are moving towards the pre-1997 era of complex income-tax laws". They hope that all these would be looked into before the Bill is passed by both the Houses of Parliament.

While welcoming the Finance Minister's Budget announcement that all investments and payments made under the said section would qualify for a deduction up to a limit of Rs 1 lakh with no sectoral caps (sub limits), tax experts feel that the "needless condition", a relic of the past, will only give a new handle to the Assessing Officers (AOs) to harass all individual taxpayers.

Mr Pallav Gupta, General Manager, Taxation, ITC Ltd, told Business Line that instead of moving towards further simplification, "we seem to be moving towards the pre-1997 era when I-T laws were so difficult to fathom". He said that since virtually every single direct tax proposals has been properly interpreted and represented to the Government for a relook wherever required, he was hopeful of many changes being incorporated in the final Act. Describing this as an attitudinal issue, he agreed that such conditions in Section 80C were not desirable, especially when the Government was clearly in favour of moving towards an EET (exempt+exempt+tax) system of taxation sooner or later.

According to Mr Narayan P. Jain, tax advocate and senior consultant, the condition that investments should be made out of income chargeable to tax was there in the previous Section 80C, which was omitted with effect from assessment year 91-92, and brought back later under section 88, which also got deleted in the Finance Act of 2002. And now, again it has been brought back to cause fresh trouble for taxpayers. Describing the condition as "unwarranted", he said the condition should be dropped, especially in view of the policy decision reflected in the Finance Act of 2002, when a similar condition was omitted by Parliament.

He said the Supreme Court, in a judgment, had observed that Section 15(1) of the 1922 Act (corresponding to Section 88 and the newly proposed Section 80C) was for encouragement of thrift and that it should be interpreted liberally so that the object is not nullified.

He said in the case of Ravi Kumar Mehra vs CIT, the apex court had said that an assessee may make payments towards LIP out of funds in his savings bank account where the balance to his credit is available before the commencement of the accounting year.

As per the Memorandum explaining the provisions in the Finance Bill 2002, (clause 35), "... .the sums paid or deposited need not be out of income chargeable to tax of the previous year".

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Dumping duty imposed on NTCF imports from China

`E-governance of judicial system to be fully implemented soon'

British Gas looks at expansion in South India

As projects fall off schedule — `Power for all' target trips

Transmission line: CERC verdict on REL's application soon

`Centre has no role on waiver of VAT on defence canteens'

`I-T sop for salaried class with rider needs relook'