In the historic Budget-2021, the Honourable Finance Minister has addressed number of issues which loom large from a very detailed narrative Memorandum of 79 pages. Here is an attempt to deal with some of the provisions assigned to me.

Section-43CA – Clause-10 of the Finance Bill, 2021 (relating to safe harbour)

As per proposed amendment to section 43CA, safe-harbour limit of 10% of consideration is proposed to be raised to 20% of the transfer consideration. In the Press-release (part of Aatma Nirbhar Bharat Package 3.0 dated 13th Nov 2020), CBDT has declared intent to make legislative amendment to this effect. The said promise has been given effect to now. The increased limit of 20% is extended for providing boost to pursuit of liquidating unsold inventory of the developers. Clear intent is to give a impetus to quick sale / transfer of flats from the unsold inventory. This is indeed a welcome measure considering the slow-down in the realty sector at present. It is relevant to note, no parallel amendment in made in section 50-C of the ITA, 1961. Further, four cumulative conditions are injected i.e.

  • Eligibility to only “residential unit”

  • Period of transfer is between 12th Nov 2020 till 30th June 2021

  • Coverage of only “first time allotment” and

  • Consideration being less than ₹ 2 CR

As such, intent is clear that, the said safe-harbour limit of 20% is only for developers or those assesses for whom, sale of residential units is a business. Though a welcome provisions, some issues of concern also creep in.

Issue-1 – A buyer may book the flat today, but transfer may happen after 30th June 2021 (due to say, loan getting delayed or legal compliances result into consumption of crucial time, etc.). In such cases, though, intent of the amendment gets fulfilled, procedure of satisfaction of all conditions in a cumulative manner remains unfulfilled. uncertainty remains at the end, as to availability of the safe-harbour limit of 20%.

Issue-2 – Though not expressly retrospective, whether, this amendment will act retroactive. For example, assume a case where, a residential unit was allotted in (say) year 2018 where, difference between stamp duty value and consideration was (say) 18% and the said residential unit gets transferred in the above referred period (i.e. between Nov-20 to June-21). In such cases, conditions will get fulfilled, though the intent not, to which, a tax officer may object.

Issue-3 – If intent of the Government is to extend boost to liquidation of inventory of unsold residential units, can such endeavour be assumed to be expressly not existing in the legislative thinking at all? One can note the relaxation given in taxation of notional income on unsold residential units in section 23 of the ITA, 1961. Initially, this relaxation was for one year from getting completion certificate, which was extended to two years. The said relaxation was considering business exigencies. A business exigency is to be understood as some hardship / constraint, etc. As such, Legislature appears compassionate to the cases of unsold inventory of developers. Assuming that the intents of removal of hardship of realty developers exists, present amendment, though effective for transfers between 12th Nov 2020 to 30th June 2021; could be argued to be going retrospective in cases, where, present conditions match on a cumulative basis.

Section 44AB – Clause 11 of Finance Bill 2021 (relating to tax audit)

As per the proposed amendment, the tax audit threshold limit of “sales / turnover / receipts” is extended from ₹ 5 Cr to ₹ 10 CR of annual sales / turnover. Vide Budget-2020, the threshold tax audit was extended from ₹ 1 Cr to ₹ 5 Cr. It is relevant to note the thinking behind i.e. giving of a fillip to non-cash transactions. As tax audit is dispended with in all such cases, burden will start mounting on the assesses as regards accuracy or otherwise of the mentions in tax Returns, since, audit typically aims to settle inaccuracies and mistakes. If an assessee, having eligible turnover of ₹ 8 Cr for AY 2021-22, and having availed tax audit compliance already, will find himself in some uncomfortable situation. Some other cases of relaxation may also emerge for present AY 2021-22. Despite resolve of the present Government not to endeavour in retrospective amendment, present amendment is retrospective of present year.

Section 44ADA Clause 12 of Finance Bill 2021 (presumptive taxation)

From the list of eligible professional assesses, who can opt for presumptive taxation scheme, LLPs have been conspicuously omitted from AY 2021-22. Earlier, any assessee, engaged into any prescribed profession was eligible for claiming benefit of presumptive taxation. It is learnt, some LLPs and other juridical persons have also claimed this benefit in past. This position is now clarified explicitly by permitting only individuals, HUFs and firms who can claim presumptive taxation regime under this section. LLPs have been removed from the said list of eligible assesses. For Income-tax purpose, an “LLP” is considered as a “firm”. This general analogy is changed for the purpose of this section. Reason for the same is stated as mandate under the respective LLP Act as regards maintenance of books of account. It appears, the endeavour of strict regulatory compliance with no adverse leverage under any other enactment is increasing. Indeed, we are entering into digital environment.

Section 142 – Clause 33 of Finance Bill 2021 (authority of enquiry)

As per present section 142, only the jurisdictional Assessing Officer can issue notice u/s 142 for making enquiries of any issue such AO deems appropriate. Considering the virtual dynamic faceless environment, this authority is to be assumed by various officers at the same time. Once the situation changes to faceless era, relevance of any particular AO is as it is lost. Above provision is only consequential.

Section 139 – Clause 32 of Finance Bill 2021 (due dates of returns)

In a lucidly explained Memorandum, the extended dates of filing of returns for such assesses, whose computation of income depends on some other assessee, are provided. At the same time, and despite COVID pandemic, resolve of the law-makers to enter the high-tech and speedy compliance era is clearly discerning from amendments made to section 139(4) for belated returns and 139(5) for revised returns. Earlier, time limits for both these actions were reduced to 12 months form end of the relevant previous year. Now, it is proposed to shorten this period of 12 months to 9 months. This is a welcome provision, though, likely to increase work-load at an early stage.

Section 153 – Clause 41 of Finance Bill 2021 (time limit to AO)

In the same spirit of shrinking the time periods for filing of belated returns / revised returns, the time available to the Assessing authorities has also been steadily reduced. As of present date, scrutiny selection notices for AY 2019-20 are yet to be received in many cases as the time limits stand extended due to COVID issues and related declarations. However, due date is 31/3/2021. Now, we are told that, assessments will be concluded within 9 months from end of assessment year. Earlier, the time available for assessments was 21 months, which was scaled down to 18 months and then to 12 months; and now, to 9 months. Next 2 years period is going to be extremely challenging for asessees and for the counsels and professionals. Consider the following last dates chart –

  1. AY 2018-19 – Last date for scrutiny assessment was 30/9/2020 (18 months rule) (Now, extended to 31/3/2021 due to COVID)

  2. AY 2019-20 – Last date for scrutiny assessment is 31/3/2021 (12 month rule)

  3. AY 2020-21 – Last date for scrutiny assessment will be 31/3/2022 (12 months rule)

  4. AY 2021-22 – Last date for scrutiny assessment will be 31/12/2022 (9 months rule)

Further, issues of regular returns, belated returns and revised returns are also certain to co-exist. Indeed, next 19-20 months are going to test the real metal of the professionals.

Section 194P – Clause 47 of Finance Bill 2021 (senior citizen)

An altogether new regime is promised to the senior citizen as regards filing of their returns. If conditions stipulated are satisfied, then, the specified bank of the specified senior citizen is to compute taxable income of such senior citizen and such senior citizens need not file tax return. This is indeed a welcome provision since, all efforts and responsibilities of compliances for the senior citizen, gets shifted to their specified banks. It appears, outsourcing of work in has reached the provisions of scrutiny assessment related sections too. Manner of declaration of information to be made by assesses is to be prescribed in the days to come. Once such compliances get concluded, the computation of income is to be the mandate of the specified bank. Albeit, specified banks may charge for the same as a service cost, etc.; but a new era is unfolding. Days are not too far, when, slowly, routine returns may also get outsourced to reputed entities and so on. Department officials can certainly focus their energies on serious aspects instead of getting vexed in passing routine scrutiny orders in large number of cases. For sake of completeness, procedure for challenges to such income computations needs to be provided, which is presently not available per se.

 

Never stop fighting until you arrive at your destined place – that is, the unique you. Have an aim in life, continuously acquire knowledge, work hard, and have the perseverance to realize the great life.

Dr. A. P. J. Abdul Kalam

Dear Members,

Hon’ble Finance Minister has presented Budget for the fiscal year 2021-22 on 1st February, 2021 in the back drop of the sever disruption of the economic activity across the globe. Hon’ble Finance Minister has presented a Budget which has been cheered by the markets as never before. She has based her proposals on the following six pillars:-

  1. Health and well-being,

  2. Physical financial capital & infrastructure,

  3. Inclusive development for aspirational India,

  4. Reinvigorating human capital,

  5. Innovation R & D,

  6. Minimum government and maximum governance.

The proposals have been appreciated and applauded by the experts. We, at AIFTP, also appreciate the same. However, we have some reservations with respect to certain proposals of the Finance Bill, 2021. Especially, those pertaining to the Income Tax Appellate Tribunal. A separate representation is being made to the Hon’ble Finance Minister under the able guidance of the seniors in the profession and Past Presidents of AIFTP. I am confident that the same will be considered by the Hon’ble Finance Minister favorably.

The Journal committee of the AIFTP has put in lots efforts to bring out the present special issue on the important proposals pertaining of Direct and Indirect Tax of the Finance Bill, 2021. I place on record my appreciation of the efforts of the Journal committee chairman Mr. Mitesh Kotecha and his team. I extend my special thanks to all the authors, who are experts in the respective fields, for giving their valuable time to the Journal of the AIFTP.

AIFTP (WZ) in association with local sister associations, hold a Virtual National Tax Conference on 17th & 18th February, 2021 on Zoom Platform. The said conference was inaugurated by Hon’ble Justice Shri P. P. Bhatt, President, Income Tax Appellate Tribunal and was well attended by the members.

Our next and first Physical National Tax Conference is scheduled to be held in Puri on 10th & 11th April, 2021 and will be hosted by Eastern Zone and due arrangements are being made to obtain the blessings of Lord Jaganath.

As decided in the NEC, we have restructure the Membership Fees to ₹ 2,500/- plus taxes upto 30th June, 2021. Hence, I would personally like to request the members to set up a target of Each One Get One that is every member is requested to enroll at least one member so that we have a better strength in our life membership.

We have come out with AIFTP Indirect Tax Journal. The said Journal is free of cost in hard copy to the members of AIFTP who opt for the hard copy by clicking the link on the website of AIFTP i.e. www.aiftponline.org. The said Journal would be circulated in soft copy through email and WhasApp to all Members.

Place: Eluru 
Dated: 18/02/2021 

M. Srinivasa Rao
National President, AIFTP

Reform not Change is the constant in the world in flux

The Hon’ble Prime Minister, in an addresses to the nation during the COVID-19 induced lockdown, mentioned that every crisis comes with an opportunity to transform ourselves. Hence, an effort was made by initiating reforms in different sectors. When the entire nation was still under lock down, a series of five restructuring phases were announced, providing stimulus package for economic relief to industries affected by COVID-19 pandemic. On 16th May 2020, the fourth announcement initiated reform measures in coal mining, mineral mining, power distribution, atomic energy, defense, civil aviation, space and social infrastructure sectors.

The Hon’ble Finance Minister has kept up the steam of reforms going on, in her budget proposals also. She has been appreciated by economists and fiscal policy experts for resisting the temptation to introduce new cess or levy to offset the strain caused on the exchequer due to the slide, in the global economy, caused by the pandemic and the halting of domestic economic activity. Her frank confession of not being able to contain the deficit and putting the same at 9.5% in a transparent manner is described as a courageous move. The stimulus, to trigger demand, as proposed through asset creation, is a very bold step in the right direction. The stress for health and infra, if implemented in right earnest, with in 3 or 4 years, down the line, lo and behold the face of the country may change.

Now, turning to the Finance Bill, 2021, I regret to say, it does not inspire similar positive vibes that the proposals of Budget 2021 do. Proposals of the Finance Bill, 2021 do carry the reform process to the direct and indirect tax legislations, but certain proposals disappoint us, professionals, as they may not be in the right spirit.

  1. The Temptation to unsettle law of the land, laid down by the Apex Court.

    Through Clause 7, 18 and 20 of the Finance Bill, 2021 the decision of the Supreme Court in the case of Smiff Securities Limited (2012) 348 ITR 302 (SC) is neutralized. The goodwill is not a depreciable asset. Again Clause 5 and 6 of the Finance Bill, 2021 reverse the law which had reached finality with the decision of the Apex Court in the case of CIT(E) v. Subros Educational Society (2018) 303 CTR 1 (SC).

  2. Not in the spirit to rationalization.

    The Clauses 8 and 9 of the Finance Bill, 2021 deal with the provisions of payment by employer of an employee’s contribution to a fund on or before the due date. There are contrary decisions of the High Courts. Bombay High Court in the cases CIT v. Hindustan Organics Chemicals Ltd (2014) 366 ITR 1 (Bom) and CIT v. Ghatge Patil Transports Ltd (2014) 368 ITR 749 (Bom) has taken view in favour of the assessee, whereas Gujarat High Court in the case of Gujarat State Road Transport Corporation (2014) 366 ITR 170 (Guj) decided this issue in favour of the department. This issue is sub judice before the Apex Court. The proposed amendment is in the nature of a clarification; thus, it would be deemed to be construed as it has always existed. The disallowance in the hands of the employer assesse is permanent as the same is not covered by the provisions of section 43B of the Income tax Act,1961. The default may be due to reasons beyond the control of the assesse. The permanent nature of the disallowance, to say the least, is regressive.

  3. Faceless is Opaque – It won’t bring Transparency, Efficiency and Accountability.

    The Appellate Tribunal, being a court, inspires confidence among the citizens as it operates beyond the control of the Income tax department and the department is also a litigant, before it, like the assesse. From the inception of ITAT, i.e., since January, 1941, it was manned by persons of integrity and caliber to acquire the status of a nonpartisan judicial body, in which citizens of this country reposed faith. The Bench has produced many High Court and Supreme Court judges. It may not be out of place to mention that the Bar consisted of professionals, who appeared before it, with persons like the legendary Jurist N.A. Palkhivala in the yesteryears and now, the present stalwarts like Dr. Y.P. Trivedi, Mr. S.E. Dastoor, Mr. V.H. Patil, the list is long. The Income Tax Appellate Tribunal, whose orders are final with respect to the facts, is proposed to be made faceless vide Clause 78 of the Finance Bill, 2021 to ensure efficiency, transparency and accountability. The proposed amendment is not in the right direction because law pertaining to taxation is not Predictive Justice; also, facelessness does not always lead to transparency and accountability. Transparency and accountability cannot be sacrificed at the altar of the so called efficiency. Questions also arise as to the constitutional validity as these provisions are violative of the Fundamental Rights, enshrined in the Constitution. However, the bureaucracy may achieve what it wanted to do since long i.e., kill an independent judicial body called the Income Tax Appellate Tribunal.

In the introductory chapter of the book “The Post-American World”, published in the year 2008, the well-known author Mr. Fareed Zakaria , at page 2 observed “We are living through the third great power shift of the modern era. It could be called “the rise of the rest”. Over the past few decades, countries all over the world have been experiencing rates of economic growth that were once, unthinkable. While they had booms and bursts, the overall trend has been unambiguously upward. This growth has been most visible in Asia but is no longer confined to it.” In these lines, the reference to ‘Asia’ was China-centric in specific and in general, was a reference to the Far East countries; we as a nation, were part of the bandwagon by default and not by design. Now our leadership is conscious of the emerging new world order, post the covid-19 pandemic. The opportunity is before us; we should reform ourselves to grab it and be at the forefront of the fourth power shift. The word Reform should be substituted in the phrase “Change is the only constant in this world in flux.”

This issue of the journal carries articles of experts, in the field direct and indirect taxes, who have commented on the important provisions of the Finance Bill, 2021. I thank all the esteemed professionals for taking out time for the journal out of their busy schedule.

K. Gopal,
Editor

The All India Federation of Tax Practitioners (AIFTP)

Inspired by the ideology to have a common platform for all those who practice taxation laws, irrespective of their individual affiliations and to enable them to share the benefits of their learning and sharing of knowledge, eminent professionals from the fields of Direct and Indirect Taxes conceived the idea of establishing an All India body for the tax practitioners. It was at the opening ceremony of the National Conference held on 11-11-1976 organised by The Chamber of Income Tax Consultants Mumbai under Presidentship of Shri B. C. Joshi, that the doyens of the Professionals christened the Association in the presence of former Chief Justice of India, Hon’ble Justice J. C. Shah, distinguished Jurist Padma Vibhushan Dr. N. A. Palkhivala Senior Advocate and Shri Ram Rao Adik, Senior Advocate, Advocate General of Maharashtra. Shri N. C. Mehta, Chartered Accountant, Mumbai, was elected as Founder President of the All India Federation of Tax Practioners ( AIFTP) of and Shri P. C. Joshi was elected as Secretary General. The AIFTP has completed 45 glorious years of its existence.

The main object of AIFTP is to spread education in the matters relating to tax laws, other laws and Accountancy.

The AIFTP has a well-equipped registered Head Office at 215, Rewa Chambers, 31, New Marine Lines, Mumbai- 400 020. The total strength of National Executive Committee Members is 75 headed by a National President, with a Deputy President, five Vice-Presidents and five Joint Secretaries. Present the National President Mrs Nikita Badheka, Advocate from Mumbai and Mr M. Srinivasa Rao, Tax Practitioner from Eluru (AP) is the Deputy President. Our eminent Past National Presidents are Late Shri N. C. Mehta, Chartered Accountant, Mumbai (1978-83), Late Shri B. C. Joshi, Advocate, Mumbai (1984-90), Late Shri L. M. Mahurkar, Tax Practitioner, Nagpur (1991-93), Shri P. C. Joshi, Advocate, Mumbai (1994-96), Late Shri Sukumar Bhattacharya, Advocate, Kolkata (1997-99), Late Dr. N. M. Ranka, Senior Advocate, Jaipur (2000-02), Dr. K. Shivaram, Senior Advocate, Mumbai (2003-05), Late Shri V. Ramachandran, Senior Advocate, Chennai (2006-07), Shri Bharat Ji Agrawal, Sr. Advocate, Allahabad (2008-09), Shri M. L. Patodi, Advocate, Kota (2010-11), Late Shri S. K. Poddar, Advocate, Ranchi (2012-13) Shri J. D. Nankani, Advocate, Mumbai (2014-15), Dr. M. V. K. Moorthy, Advocate, Hyderabad (2016), Mrs Prem Lata Bansal, Senior Advocate, Delhi (2017) Shri Ganesh Purohit, Senior Advocate, Jabalpur (2018), Dr. Ashok Saraf, Senior Advocate, Guwahati (2019) Mrs. Nikita Badheka, Advocate, Mumbai (2020) Shri Malladi Srinivas Rao Tax Practioner from Eluru, Andhra Pradesh has been elected as National President for the year 2021.

The membership of the AIFTP includes Senior Advocates, Advocates, Solicitors, Chartered Accountants and Tax Practitioners, Practicing Direct or Indirect Taxes, from all States in the Country. Its members enjoy a strong bond of fellowship leading to fraternal brotherhood amongst professionals. The AIFTP is the symbol and spirit of National Integration. As of today, the AIFTP is the only voluntary professional organisation of our country which has 138 Professional Associations as its affiliated members and more than 8701 individuals as life members from 27 States and 4 Union Territories.

For conducting regular educational activities, the AIFTP has various Sub-Committees such as Journal Committee, Law & Representation Committee (Direct & Indirect Taxes), ITAT Bar Associations’ Co-ordination Committee, Membership Development & Public Relations and Times Committee.

The AIFTP publishes a monthly Journal covering the latest reported & unreported decisions of the Supreme Court, High Courts and Income Tax Appellate Tribunals including the articles, opinions and latest developments on direct and indirect taxes by experts in the field. The unique feature is that every quarter, it publishes the gist of Important Case Laws published in 33 Tax Magazines, www.itatonline.org from across the country. Yearly digest of case laws from 2012 onwards are also available in the website www. aiftponline.org and www.itatonline.org which can be down loaded by the members and tax professionals.

AIFTP publishes a monthly newsletter called AIFTP TIMES which is sent to all the members free of charge. Newsletter contains important notifications, circulars and other topical information apart from various activities of the AIFTP.

AIFTP website i.e. www.aiftponline.org, is an informative source for the members. The website is regularly updated by a team of dedicated professionals. The Journal and Times are available on the website.

AIFTP has been making representations for better tax law and tax administration. AIFTP and Associate members have filed more than 35 Public interest petitions before various Courts for better administration of tax laws and to up hold the independency of judicial forums. AIFTP regularly sends Pre- and Post-Budget Memorandums. Many of the suggestions and the recommendations are accepted. It regularly publishes books in simple language and question-answer format at a low cost. It has published more than 45 publications till date. Its first e -publication on the subject of Direct Tax Vivad Se Viswas Schme 2020 and the said publication was released on 22-4-2020. AIFTP in association with Income Tax Appellate Tribunal Bar Association, Mumbai has published a publication named “Digest of Case Laws — Direct Taxes (including allied laws) (2003-2011)”, to Commemorate the 150th Year anniversary of the Bombay High Court. In the year 2015, “Interpretation of Taxing Statutes – Frequently asked questions”, which was dedicated to Honourable Mr. Justice S. H. Kapadia, former Chief Justice of India, (2017) Income tax Appellate Tribunal – A Fine Balance, Law Practice, procedure and conventions – Frequently asked questions – Dedicated to Padma Vibhushan Late Dr. N. A. Palkhivala, Senior Advocate AIFTP has published a publication titled (2018) “311 – Frequently asked questions on Survey – Direct taxes – Dedicated to Hon’ble Justice Dr. B. P. Saraf, former Chief Justice of Jammu and Kashmir High Court. (2020) 151 Land mark judgements of the Hon’ble Supreme Court of India – 151 years of Mahatma Gandhi -” on 2-10 – 2020 the auspicious occasion of 151st birth anniversary of Father of the Nation Mahatma Gandhi which is dedicated to Hon’ble Justice Dr. B. P. Saraf, former Chief Justice of Jammu and Kashmir High Court. At National Convention held on 5 th December 2020, the publication titled “Reassessment law, Procedure & Practice (Practical guide) was relased the said publication is dedicated to Hon’ble Justice Dr. B. P. Saraf, former Chief Justice of Jammu and Kashmir High Court.

AIFTP jointly with the Association Members, organise National Seminars, Conferences and Conventions in various parts of the Country to update its members on Direct and Indirect Taxation. A unique feature of the AIFTP is that its faculties, chairmen, trustees, office bearers and members of the National Executive and Zonal Committees pay a registration fee and bear their own travel and stay expenses. From April 2020 to September 2020 during the period of Covid-19 Pandemic the AIFTP has conducted more than 100 Webinars on various subjects and all webinars were without any charges.www.aiftponline.org AIFTP as an association with the help of their members have contributed an amount of ₹ 11 lakhs to the Prime Minister Cares Fund. In the year, 1999 the AIFTP had published a publication titled “NRI – A Legal companion” which was dedicated to the War Heroes of Kargil and the entire surplus of the said publication was handed over to the Defence fund.

For the development of the Tax Bar, the “Nani Palkhivala Memorial National Tax Moot Court Competition” and “Research in Tax Laws” was started under the banner of “Palkhivala Foundation” at Mumbai, wherein every year students from more than 25 leading law colleges of India participate in the competition and more than 100 Law Colleges are participating in the Research Competition.

AIFTP has adopted the Code of Ethics to its members which is part of the constitution of the AIFTP

As per an appeal made by the AIFTP, the Government of India has released Commemorative Postage Stamp in Memory of Padma Vibhushan Late Dr. N. A. Palkhivala, Senior Advocate on 16th January, 2004. The then Hon’ble Prime Minister of India, Shri Atal Bihari Vajpayee released the Commemorative Postage Stamp at Mumbai.

Since 2004 AIFTP conducts regular International Study tours, in the first study tour a seminar was held at Law Society of England and Wales on 24-04-2004, wherein a publication titled “India-A Global Business Destination” was released at England. In the first International Tax Conference which was held on 19th to 21st November 2009 at Mumbai wherein heads of Professional Organisations from 16 Countries attended the International Tax Conference.

AIFTP is considered a National Integration of Tax Professionals of India. AIFTP have many eminent professionals as members, some have been elevated as Judges of the Supreme Court, High Courts, and Tribunals. Most of the leading Senior Advocates, Advocates who practice on Direct or Indirect Taxes, many past Presidents of Institute of Chartered Accountants of India, Chairman and member of Bar Councils of various States, leading Lawyers, Chartered Accountants and Tax Practitioners of our country are esteemed members. AIFTP is recognised globally as one of the vibrant Associations of Tax Practitioners of India.

On 11-11-2016, on the occasion of completion of 40 years of the AIFTP a publication and a short film titled “40 Years of Milestones and Beyond” was released by the AIFTP which contains the history of the AIFTP. www.aiftponline.org

With active support of the members of the AIFTP the flag of the AIFTP will fly high for the times to come.

Shri Nani Palkhivala delivering Keynote address at 1st All India Conference on Taxation on 11th November 1976

When I die …

Give my sight to the man who has never seen a sunrise.

Give my heart to one who has known the agony of the heart.

Give my blood to a youth pulled from the wreckage of a car so that he might live to see his grandchildren play.

Let my kidneys drain the poison from another’s body.

Let my bones be used to make a crippled child walk.

Burn what is left of me and scatter the ashes to the wind to let the flowers grow.

If you must bury something, let it be my faults and my prejudices against my fellowmen.

Give my sins to the Devil.

Give my soul to the God.

If you wish to remember me, do it with a kind deed or word to someone who needs you.

If you do all I’ve asked, I’ll live for ever.

— Nani A. Palkhivala

Source: Interview with Shri Palkhivala by Bombay Chartered Accountants’ Society (BCAJ-September 1982 P. Nos 791 to 815

Q. Would you kindly be specific as to what particular qualities you look for an individual and what particular qualities appealed to you in the individuals you just talked about?

A. I respect courage integrity and humility. These three qualities, I think are essential to make a likeable personality.

Firstly, a man must have the courage of his convictions. He must not be coward. He must honestly believe certain things and he must say publicly what is believes privately.

Secondly, he must have integrity – not only financial integrity, which is much more common than intellectual integrity, that is honesty of purpose, the intellectual honesty which makes him say what he believes to be right. So, if a Chartered Accountant or a lawyer has intellectual integrity he will never give an opinion merely to suit the client. I think every professional man must have that ideal before him, when advising clients.

Thirdly, humility is just important as courage and intellectual integrity. The higher a man goes in life more the humble he should be. I remember vividly a sentence I read 50 years ago at school; “The higher a man is in grace, the lower he will be in his own esteem “the grace referred to here being the grace of God. I some how by temperament, find it difficult to admire people who are egoists. The cleverest of us, the greatest men who ever lived are just like pygmies. What are the greatest achievements of a man against the backdrop of eternity? India’s great heritage teaches true humility. We are all insignificant planets in an infinite Universe.

Source: 1st Nani Palkhivala National Tax Moot Court Competition (16th to 18th December 2004)

Justice and the rule of law are perhaps two of the noblest concepts evolved by the wit of man. To the Romans, Justice was a goddess whose symbols were – a throne that tempests could not shake, a pulse that passion could not stir, eyes that were blind to any feeling of favour or illwill, and the sword that fell on all offenders with equal certainty and with impartial strength. It was said by a great thinker that God is more palpably present in a Court of justice than in a monastery. Ancient Indian culture pays a similar tribute to dispensers of justice. But in our own times there has been a precipitate diminution of this universal admiration and a sharp erosion of the values which ought to actuate the administration of justice.

Doubtless, the law is imperfect, and it would be imperfect even if it were made by a committee of archangels. This is understandable. But according to an eminent writer, the Court is no longer looked upon as a cathedral but as a casino: if you are dissatisfied with the Trial Court’s judgment, you double the stakes and go to the Division Bench; if you are dissatisfied with the Division Bench judgment, you treble the stakes and go to the Supreme Court.

If some people in our country believe that the difficulties we face in our administration of justice are due to British influence, I would emphatically dissent from such a view. I do not think that the British should be blamed for the ailments afflicting our legal system today. If we did not have the rules of British jurisprudence, it would be impossible to administer justice in this country.

There are three grave shortcomings of the present system of administering justice.

Firstly, the commercialization of the legal profession. I do not think the legal profession was ever so commercialized as it is today. When I started my practice in 1946 on the Original Side of the Bombay High Court, if a counsel made a factual statement to the judge, it was implicitly believed to be true, You seldom heard of an affidavit, filed on behalf of the government or any public authority, which did not contain the whole truth. But today a lot has changed. Counsels often make statements which are factually incorrect, and affidavits are after filed, even on behalf of public authorities, which do not state the truth. Unfortunately, we accept perjury as a fact of Indian life. The worst danger is not that even persons in high public office perjure themselves. The worst danger lies in public acceptance of such degradation of national character. As a man who loves India not wisely but too well, I ask the question – Why can we not have standards as high as those of mature democracies in the world? After all, our ancient culture is the noblest ever known.

Secondly, administration of justice suffers from the intractable complexity of modern society. Life has become far more complex, and corruption and all round lowering of standards are more pronounced, than ever before. One is reminded of the remark of Dr. Adenauer, a former Chancellor of West Germany. He said, “In creating man, God hit upon a very poor compromise. If he had made man more intelligent, he would have known how to behave; if He had made man less intelligent, he would have been easier to govern.” This remark neatly sums up the dilemma of democracy.

Thirdly, while all the time we emphasize our rights, we do not lay a corresponding stress on our responsibilities. It is true that eternal vigilance is the price of liberty. But it is true, in even a deeper sense, that eternal responsibility is also part of the price of liberty. Excessive authority, without liberty, is intolerable; but excessive liberty, without authority and without responsibility, soon becomes equally intolerable. De Tocqueville made the profound observation that liberty cannot stand alone but must be paired with a companion virtue : liberty and morality; liberty and law; liberty and justice; liberty and the common good; liberty and civic responsibility.

If I were asked to mention the greatest drawback of the administration of justice in India today. I would say that it is Delay. There are inordinate delays in the disposal of cases. We, Indians, have some fine qualities, but a sense of the value of time is not one of them. Perhaps there are historical reasons for our relaxed attitude to time. Ancient India had evolved the concepts of eternity and infinity. So what does it matter if thirty years are wasted in a litigation against the backdrop of eternity. Since we live in eternity, the waste of decades is of no significance. Further, we believe in reincarnation. What does it matter if you waste this life? You have many more lives in which to make good.

The fault is mainly of the legal profession. Adjournments are asked for on the most flimsy grounds. If the judge does not readily grant adjournments, he becomes unpopular. I think it is the duty of the legal profession to make sure that it co-operates with the judiciary in ensuring that justice is administered speedily and expeditiously. This is the one duty of which the legal profession is totally oblivious.

What are the ways in which the problem can be even partially tackled?

Firstly, we must educate our lawyers better. We produce ethical illiterates in our law colleges, who have no notion of what public good is. In India the number of advocates today is approximately six lakhs. We have the second highest number of lawyers in the world, the first being the United States of America which has over eight lakh legal practitioners. These large numbers result in a lot of lawyer-stimulated litigation in the two countries.

Secondly, we must improve the quality of public administration which is today at an all-time low. In the last fifty years India was perhaps never governed so badly as it is governed today. We have too much government and too little administration; too many civil servants and too little civil service; too many controls and too little welfare; too many laws and too little justice.

Thirdly, the citizenry must be better educated to evolve a higher standard of public character. Ancient Indian culture must be taught in schools and colleges. The synergic effect of the different cultures, the amalgam of which is called Indian culture, is bound to prove of great ethical value. Will Durant said that just as continuity of memory is necessary for the sanity of an individual, continuity of the nation’s traditions and culture is necessary for the sanity of the nation.

[Source: Souvenir, Bar Council of Maharashtra and Goa, Mumbai, State Lawyers Conference at Solapur on 8th and 29th March, 1997]

THE SECOND OF October has again come by, and our hearts and minds go back to the pilgrim of eternity. Smt Kamala, the director of this Gandhi Memorial Centre, gave us a beautiful thought when she said that a part of all the great spirits of the past might have found a place within the soul of Mahatma Gandhi.

Gandhiji’s impact on those who came in contact with him was almost magical. Rabindranath Tagore said:

‘At Gandhiji’s call India blossomed forth to new greatness, just as once before in earlier times when Buddha proclaimed the truth of fellow-feeling and compassion among all living creatures. ‘

Even so hard-headed a man as George Bernard Shaw, to whom praise of others did not come very naturally, when asked for his impression upon meeting Mahatma Gandhi said: “You might as well ask for someone’s impression of the’ Himalayas!’ Romain Rolland, the great French writer and Nobel prize-winner, said that Mahatma Gandhi ‘had introduced into human politics the strongest religious impetus of the last two hundred years’. If instead of two hundred years, he had said twelve hundred years, he would have been still right.

The Mahatma met Charlie Chaplin, confessed to him frankly that he had not seen his pictures, and expounded to him his theory about the disastrous effects of the machine on human life. Their conversation led Charlie Chaplin to produce Modern Times.

In our own times, Anwar Sadat of Egypt has publicly spoken about the tremendous influence Mahatma Gandhi’s writings had on him.

Gandhiji gave a decisive new direction to history. What was it about this man which held the human race in thrall? Who was this individual? And how did he come to wield such influence over the rest of mankind? He himself said that he was a very strange individual. He confessed that he was not intellectually brilliant, but he added that while there are limitations to the development of the mind, there are no limitations to the development of the heart.

If one were to denote in a word what the Mahatma had, it is the Sanskrit word, buddhi—the capacity inter alia to perceive the Truth. This is a capacity which few individuals have, and you can develop it only by deep self-study, by profound devotion. He was able, as a result of his buddhi, to propound solutions which went far beyond the insights of any academic studies of politics or economics or science. Let me tell you what he said about himself:

‘What I want to achieve – what I have been striving and pining to achieve these thirty years – is self-realization, to see God face to face, to attain Moksha*. I live and move and have my being in pursuit of this goal. All that I do, by way of speaking and writing, and all my ventures in the political field, are directed to this same end. I am, but a weak aspirant, ever failing, ever trying. My failures make me more vigilant than before and intensify my faith. I can see with the eye of faith that the observance of the twin doctrine of Truth and Non-violence has possibilities of which we have but very inadequate conception.’

The pregnant phrase ‘the eye of faith’ reminds you of the lines of George Santayana:

‘Columbus found a world, and had no chart,

Save one that faith deciphered in the skies;

To trust the soul’s invincible surmise

Was all his science and his only art.’

It was the only science and the only art of Mahatma Gandhi – to trust the soul’s invincible surmise.

Before I go further into some of the ideas which the Mahatma propagated, I would like to mention one interesting point. There seems to be a mystic – karmic – bond between the United States and India, and you see this link in the case of Mahatma Gandhi. When he was in South Africa (he went there in 1893), the two foreigners who befriended him were both Americans. They gave him succour and shelter. After he came back to India, the first foreigner to spot his incredible spiritual strength was an American. On 10th April 1922, Reverend John Haynes Holmes delivered a speech in an American Church on “Who is the Greatest Man in the World?’ Reverend Holmes declared that he had no doubt that the greatest man alive was Mahatma Gandhi. He compared the Mahatma to Christ. In 1922 no other foreigner had the conception of the Mahatma as the prophet of the twentieth century.

Then came the great years of Mahatma Gandhi in India. There he started his civil disobedience movement, which he implemented with phenomenal success. The one person who influenced him the most in his thinking on civil disobedience was again an American Henry David Thoreau. He had read Thoreau in the year 1907 when he was in South Africa. He had reproduced extracts from Thoreau’s writings in – Young India which he was editing at the time in South Africa.

The last man to be the disciple of the Mahatma was an American – Vincent Sheean. He met the Mahatma in Delhi on 27 January 1948, three days before the Mahatma, was assassinated, and offered himself as a disciple. The Mahatma talked to him at some length on that day on a variety of subjects and quoted to him the lines from the Upanishads: ‘The whole world is the garment of God; renounce it then and receive it back as the gift of God.’ Sheean was most impressed and met him again on the 28th. They were to meet again in the evening of the 30th, but that was not to be.

The last interview which the Mahatma gave was in the early afternoon on 30 January, and it was to an American. She was Margaret Bourke-White who came to interview him for Life magazine. She asked him the question: would he persist in his theory of non-violence in the event of a nuclear attack on a city? The Mahatma’s reply was that if the defenceless citizens died in a spirit of non-violence, their sacrifices would not be in vain; they might well pray for the soul of the pilot who thoughtlessly sprayed death on the city. This was his last message of compassion to mankind.

In our times his influence on America has been of the most significant character. It was his influence which led Martin Luther King to start a civil disobedience campaign on nonviolent lines. Vice-President Mondale has publicly stated how deeply influenced he was as a young man by Mahatma Gandhi’s teachings.

President Carter is another great admirer of the Mahatma. When Hubert Humphrey died, there was one quotation in President Carter’s tribute to the eminent Senator and that was what the President had read at the Gandhi Samadhi in New Delhi. The words quoted enumerate what Gandhiji regarded as the Seven Deadly Sins:

‘Commerce without ethics; Pleasure without conscience; Politics without principle; Knowledge without character; Science without humanity; Wealth without work; Worship without sacrifice.’

Let me now say a few words about the Mahatma’s ideas which have changed the course of human history. His main emphasis, as we all know, was on truth and non-violence. A thinker has said that truth is a scarce commodity, but its supply has always outstripped the demand. While truth does not seem to be triumphing all round us – somehow, somewhere, in some way, something is working which is bringing the human race closer to truth. .

This is what the Mahatma has to say about truth and non¬violence:

‘I may be a despicable person; but when Truth speaks through me, I am invincible.’

Truth alone will endure; all the rest will be swept away before the tide of Time.’

‘Nonviolence is the law of our species, as violence is the law of the brute.’

‘Non-violence is the greatest force at the disposal of mankind. It is mightier than the mightiest weapon of destruction devised by the ingenuity of man.

‘I do not believe in short cuts which involve violence. However much I may sympathize with and admire worthy motives, I am an uncompromising opponent of violent methods even to serve the noblest of causes. There is, therefore, really no meeting-ground between the school of violence and myself.’

It was not a personal God that the Mahatma believed in. He had the very, very deep and profound Hindu concept of Brahma-the all-prevading Reality, which is God in its various manifestations. It is that God that he believed in. To quote his own words:

‘To me God is Truth and Love; God is Ethics and Morality; God is fearlessness; God is the source of Light and Life, and yet He is above and beyond all these. He is even the atheism of the atheist; he transcends speech and reason.’

Ralph Waldo Emerson, who was well-versed in Indian culture, has written a poem called ‘Brahma’, where this very idea is memorably expressed:

‘They reckon ill who leave me out;

When me they fly, I am the wings;

I am the doubter and the doubt,

And I the hymn the Brahmin sings.’

God is the doubter and the doubt, and God is the atheist and his atheism. In other words, there is just no escape from Him. The same thought was expressed by Francis Thompson in The Hound of Heaven. Ultimately the sceptic realizes that God has been by his side all the time.

Another sentence from Gandhiji: ‘Scriptures cannot transcend reason and truth; they are intended to purify reason and illuminate the truth.’ He tried to synthesize the essentials of all religions: ‘Indeed religion should pervade every one of our actions. Here religion does not mean sectarianism. It means a belief in ordered moral government of the universe. It is not less real because it is unseen. This religion transcends Hinduism, Islam, Christianity, etc. It does not supersede them. It harmonizes them and gives them reality.’

He identified himself completely with the common man. He spoke and he worked not for the ruler

‘but the ranker, the tramp of the road,

The slave with the sack on his shoulders

pricked on with the goad,

The man with too weighty a burden,

too weary a load.’

As regards the need of identifying oneself with the masses, he observed —

‘We must first come in living touch with them by working for them and in their midst. We must share their sorrows, understand their difficulties and anticipate their wants. With the pariahs we must be pariahs and see how we feel to clean the closets of the upper classes and have the remains of their table thrown at us. We must see how we like being in the boxes, miscalled houses, of the labourers of Bombay. We must identify ourselves with the villagers who toil under the hot sun beating on their bent backs and see how we would like to drink water from the pool in which the villagers bathe, wash their clothes and pots, and in which their cattle drink and roll. Then and not till then shall we truly represent the masses and they will, as surely as I am writing this, respond to every call.’

The Indian masses responded to the Mahatma’s Gall in a spirit of total surrender.

The Mahatma dealt with problems which are timeless and universal because they spring from enduring weaknesses of human nature and human society. Since the solutions he found for them were based on eternal verities, his influence and, his relevance are also timeless and universal.

On this second day of October, we can have no better wish for India than that the great spirit of the Mahatma may always abide with our people.

(Source – Palkhivala – Selected writings, Page 338)

There are Many aspects of the law which are instinct with romance but none of its aspects is mere saturated and dripping with fascinating interest than its historical evolution. The sources of English law said Chief Justice Hale, are as undiscoverable as the sources of the Nile. But it is not necessary to go as far back as the sources in order to discover the romance of law’s historical evolution

Even as late its the last century there were in existence the Court of Chancery, the Doctors Commons and Debtors’ Gaol. All the three institution have been gibbeted to eternity by Dickens the Court of Chancery in “Bleak House”, the Doctors Commons in “David Copperfield”, the Debtors’ Gaol in “Little Dorrit”. It is hardly credible that less than a hundred years ago ten per cant of all the debtors brought before the court were condemned to languish for the rest of their lives in gaol.

All that time the law of evidence was so unreasonable as to barb with truth the sneer that the law is an ass. No interested person could be called as a witness. As a wit once put it, “If a farmer in his gig ran over a foot-passenger in the road the two persons whom the law singled out to prohibit from becoming witnesses were the farmer and the foot-passengers.” Now the law has been wisely changed and the people who know most about the facts of a case are called to tell the court what they know.

Again, a century ago there were no limited companies. The company with limited liability is one of the greatest milestones by the wayside of legal progress. But it cannot he denied that the institution of the limited company has afforded very generous scope to the ingenuity of balance sheet manipulators, in parliamentary languages and swindlers, in plain English. Wordsworth has assured us that:

One impulse from the vernal wood

May teach you more of man,

Of moral evil and of good

Than all the sages can..

But it has been sorrowfully confessed that as a student of moral evil you can learn more from section 285 of the Indian Companies Act, which deals with defaults and delinquencies of directors, than from all the woods and forests in the world.

Even an apparently plain crime like bigamy has had an interesting historical evolution. In a statute, de Bigamis of Edward the First, we read that the felony of bigamy then marrying two virgins successively one after another, or marrying a widow; but this is of course no longer law. The offence of bigamy is now limited to going through a second marriage by one who has a former spouse still living. The curious definition expressed in the Plantagenet Statute is derived from the Canon law.

As late ire 1818 a man was challenged in the court to ordeal by battle, and the court was compelled to hold that such a right still existed in a challenger. In the ancient days the plaintiff had the option of proving his case in the court or proving the justice of his cause by defeating the defendant in battle. By the end of the Middle Ages this had become a dead letter, but by a strange over sight the law had not been repealed. Therefore Lord Ellenborough, who decided the case of Ashford v, Thoronton in 1818, was compelled to acknowledge the plaintiff right to challenge the defendant in battle. In the other words of the Lord Chancellor, ‘The original law of the land is in favour of wager by battle, and it is our duty to pronounce the law as it is and not as we may wish it to be. Whatever prejudices, therefore, may justly exist against this mode of trial, still, as it is the law of the land, the court must pronounce judgment for it.”

The offence o contempt of court has also a story of absorbing interest behind it. In old days persons who were guilty of contempt in the presence of court had their right hands cut off. An Act of Parliament of Henry the Eighths provides for the execution of this barbarous sentence but also (it must be admitted) for the kindly after-treatment of the offender minus the right hand The Act in its infinite kindness provides that the victim shall have a surgeon at. hand to sear the stump of the right arm, a sergeant of the poultry with a cock ready for the surgeon to wrap about the stump, a sergeant of the pantry with bread to eat, and a sergeant of the cellar with a cup of red wine to drink. The law may be an ass, but it has now become a gentleman and no longer provides for barbarous sentences.

The most famous case of contempt of court occurred in 1772 when one, Johns was committed to the Fleet for contempt. It appeared that he had compelled a poor wretch who sought to serve him with a witness summons to devour both the parchment and the wax seal of the court, and had then, after kicking him so savagely as to make him insensible, ordered his body to be cast into the river. Evidently, volcanic range was the favourite indoor sport of the historic Johns. Of course it is no contempt merely to tear up the writ of summons in the presence of the officer of the court, because, once the service is lawfully effected, the court is indifferent to the treatment of its stationery. The case of Johns is only one of the innumerable cases in the Law Reports which are so curiously instinct with the eternal Human Comedy.