March of the Professional

Speech by Hon’ble Mr. Justice C. K. Thakker, Judge, Supreme Court of India at the function of
All Orissa Tax Bar Association on 20-1-2007 at Rourkela

Theme : Tax Profession – Yesterday, Today and Tomorrow

“All Orissa Tax Bar Association” deserves to be congratulated for holding “All Orissa Tax Conference, 2006-07” on “Tax Profession: Yesterday, Today and Tomorrow”,

Taxes on income and wealth are not of few year’s origin. These have been levied and collected in various forms even in primitive and ancient communities. Only their forms have changed in the course of time. In India, taxes have been levied since remote past and the same have been in force in one form or another. Manu’s conception of how taxes should be collected was that of a milkman who takes out milk from a cow or a bee who takes pollen from a flower. Kautilya’s Arthasashtra deals with the systematic method of taxation in a real elaborate and planner manner. He has described in. great detail the tax administration in the Mauryan Empire. It is remarkable that the present day tax system is in many ways similar to the system of taxation which was in vogue before more than two thousand years. After Britishers came here, several statutes were enacted on the subject. The Income Tax in India came into its own with the enactment of the Indian Income Tax Act, 1922. Though that enactment had only few sections, it made the law very complicated. With all its complexities, income tax lawyers were very comfortable and happy with the provisions of the Act. The Act and the professionals developed a mutual familiarity and the small number of sections enabled them to come to easy grip with the law.

Since, the statutory provisions were not adequate to cope with the fast changing Indian economy in 1961, a new Act titled Income-tax Act, 1961 came into force. Even that Act has undergone numerous amendments during the last four decades which has added to confusion and complexities in the income-tax. As stated by Hon’ble Mr. Justice S. Ranganathan, at the K.R. Ramamani Memorial lecture, during this period, establishment of Commissions and Committees galore, announcements of voluntary disclosure and settlement schemes of varying hues, transient tax policies involving constant shifts, modifications in the rigours of provisions regarding penalty and prosecution, introduction of a legislative ‘trident’ targeting wealth, gifts and expenditure alike (the spikes of which have since suffered considerable damage) and various attempts at a so-called simplification of the tax laws have flooded. In the recent years, however, a more liberal policy has come to prevail. Its vital features are a drastic cut of tax rates to make them more reasonable and acceptable and an attempt to create a more cordial relationship between the taxing authorities and tax-payers based on true disclosures and mutual trust.

The Law Commission of India has observed;

“The hopeless confusion into which the. income-tax law has fallen is mainly due to precipitate and continuous tinkering with the Act by the Legislature. The amendments to the Income-tax Act have been so short­sighted and so short-lived as to rob the law of that modicum of stability which is essential to its healthy growth.

Before the provisions of the Act can be sufficiently clarified by the judicial process, new provisions are substituted in their places. In legislation as in other fields of human activity, it is well to bear in mind the dictum of Bacon, “Tarry a little, so that we may make an end the sooner’. Stability is most essential to the proper administration of a taxing statute, and if the tax structure of this country is to be put on a sound footing, it is essential that a halt should be called to the making of ill-digested amendments in a frenzy of hurry which has characterized the history of income-tax law of the last few years.

Another important area of taxation is tax avoidance and tax evasion. The great American Jurist Oliver Wendell Holmes said;

“Taxes are what we pay for civilized society. It is one of the eternal conflicts out of which life is made up is that between effort of man to get the most he can for his services, and that of society, disguised under the name of capital, to get his services for the least possible return,”

The encouraging dicta of Lord Atkin in IRC vs. Duke of Westminster, (1934) 19 TC 490, the grudging concession by Viscount Simon in Latilla vs. IR, (1943), 25 TC 107, and the stern warning of Lord Greene in Lord Howard De Walden vs. IR, (1942) 25 TC 121, all find their echo in the Indian cases. It is well-known that transactions of a dubious nature are often entered into by making use of the corporate personality of companies.

It has been rightly said that taxes are what we pay for civilization. A good governance needs money to discharge its obligation. With the changing concept of Government, and duties of State, from a ‘Police State’ to a ‘Welfare State’, we need to maintain ‘law and order’ and also several public welfare activities. Unfortunately, however, tactics of tax evasion and tax avoidance are increased. Such tendency must come to an end. People at large must realize that tax-planning is not forbidden but tax avoidance cannot be allowed.

If we want to build on new found opportunities in the era of globalization and. liberalization, and remember that taxations are sinews of Common Wealth. That is to say bonding force between the civilized society and good governance. Hence, the solution lies in building firmness of character in ordinary man of body polity of this nation, by lifting the common value base of the community as a whole. In the current scenario we require to give a healthy outlook to the culture in the country.

The legal luminaries present here will discuss the Tax Profession particularly with reference to the new areas of taxation brought into to augment resources by the State, such as fringe benefits, Value Added Tax (VAT) and Service Tax. It is indeed a commendable work to explore the strength and weaknesses of the new enactments and complexities arising therefrom for the tax-payers.

It is an exercise of groping into territory of uncertainty. Thus, an effort of analyzing the same by bringing together the past, present and future by the ‘All Orissa Tax Bar Association’ is not only commendable but will also be of great Importance for the generations to come. With this hope that this conference which is to be held on 20th January, 2007 will be a great success, I extend warm wishes to the participants and the organizers.