The Hindu Business Line : Chidambaram defends move on settlement panel provisions

TIGHTENING PROCEDURES: The Union Finance Minister, Mr P. Chidambaram, and the Assocham President, Mr V.N. Dhoot, at an interacitve session on `Post-Budget Analysis,' in the Capital on Thursday. — Ramesh Sharma

New Delhi March 8 The Finance Minister, Mr P. Chidambaram, on Thursday defended the Budget 2007-08 move to tighten the provisions of the Settlement Commission, stating that the Government was "not happy" with the way the Commission worked.

"If something lingers for 4-5 years... At the current rate of disposal, the Direct Tax Settlement Commission will take five years to dispose of a case. How does that help settlement and therefore the tightening of the procedure to require settlement to take place within a year," Mr Chidambaram told industrialists at a post-budget session, organised by the Associated Chambers of Commerce and Industry of India (Assocham).

He highlighted that settlement was not adjudication, mediation or conciliation. "Nobody compels anyone to go to a Settlement Commission. If you go to a Settlement Commission, there must be full and true disclosure. The Commission must also settle," Mr Chidambaram said.

The Finance Minister highlighted that Settlement Commission was like a confession in a Church. "You go to the Settlement Commission and say, I have not disclosed this income. I have not disclosed the liability under customs or excise law, so please settle my case," he said.

He, however, did not go into the reasons for curtailing the Settlement Commission's power to grant immunity from prosecution to only those under the Income-tax Act and Wealth Tax Act.

Budget 2007-08 proposes to stipulate that the Commission should not grant immunity from prosecution under any law other than Income Tax Act and Wealth Tax Act. However, in respect of pending applications, the existing provisions would continue.

Under the existing provisions, it is provided that the Commission may grant immunity from prosecution under Indian Penal Code, Income-Tax Act or any other Central Act.

On the rationale for removal of tax benefit under Section 80-IA to undertakings/enterprises of Indian companies undergoing amalgamation or de-merger after March 31, 2007, Mr Chidambaram attributed this move to "misuse" in the name of restructuring.

"Companies that are infrastructure companies have taken advantage of higher depreciation and then hived off companies to take further advantage of ten-year tax holiday. Therefore, we have said that companies that enjoy Section 80-IA must enjoy the tax advantage, but not get them undue advantage through the restructuring process," Mr Chidambaram said.

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