THE MAKING OF TAX DECISIONS.

[Sadanand Bulbule]

THE MAKING OF TAX DECISIONS.                    

 “SEASONS CHANGE BUT DUST ON THE ROADS REMAINS THE SAME”.

1. Our decisions affect people. Nearly every decision we make will affect different people in one way or the other way. It is important to be aware of the influence our decisions will have and understand what the “cost” will be. The decisions we make demonstrate our personal values, integrity and character.

2. Every government requires money to offer essential services to its inhabitants. The government‘s primary source of funding is taxes. The government charges a variety of taxes, the most common of which are direct and indirect taxes. Direct taxes are paid directly to the government by the citizen; they are most often levied on income. An indirect tax, on the other hand, is a tax placed on goods and services. The fundamental importance of tax in simple words is like this:

Importance of taxation.

A.No constitutional government can exist without it;

B. It is one great power upon which the whole national fabric is based;

C. It is necessary for the existence and prosperity of the nation;

D. It is the lifeblood of the nation.

Requisites.

E.Taxes shall be within the jurisdiction of the taxing authority in levy, assessment and collection after giving notice and personal hearing with due process of law; and

F. Taxing power cannot be exercised beyond the boundaries of law.

Therefore the current article looks at the role of ethics and moral effects in guaranteeing tax decisions upholding fairness at all levels.

3. These days everyone is experiencing outcome of formation of new tax laws, subsuming tax laws and repealing out-dated tax laws with intent to spread more fairness and equity with less law. This is really a noble move in the maximum governance with minimum administration. But looking at the intrinsic object of such move, the moot question is, whether the objects have yielded desired the fruits of lawmakers in reality? The answer remains disturbing and disappointing. The reason is the process of making decisions under taxation is contaminated and therefore it needs to be purified once again.

4. In simple terms, “tax decision” means a ruling, decision, opinion or any other written resolution of the competent authority that involves a substantive or significant technical or procedural issue and includes actions taken by such authority based on the prevailing laws conjointly with the benefit of set of settled judicial rulings. It means the conclusions of law and decision in a case in which tax authority does not decide the way it is required leads to needless litigations. So naturally the litigant bundled with merits has all the rights to challenge fallible decisions causing unwanted harm to him. If the prudent tax authority takes decision under the framework of law, the chances of going to the higher forums are remote. But such decisions are seldom experienced in the present times. Therefore the crucial point here is the process that makes the decision of tax authority.

5. Many questions are raised about the credibility of the present system of resolving of tax litigations. Therefore a “fair and transparent mechanism” though in place needs to be fast-tracked to make independent decisions without being influenced. And personality of tax authority is not only important to make independent decisions but in fact such decisions reflect the personal values, integrity and character. Under the compulsion of unscientific targets or otherwise, tax authority forces itself to foist tax at various levels irrespective of its sustainability and justifiability. This is very disturbing.

6. It is bitterly experienced that undue taxes are foisted for unknown reasons. How can a tax authority foist tax when it is not legally due is a trillion-dollar question? Can the legal system remain mute? Certainly not, since law and legal system is not vacuum to allow such foisting of undue tax outside the line of law. This would be tax liability which is not due and it cannot be retained besides being unjustly enriched. No tax can be collected without authority of law is well settled ruling under the Indian Constitution. A robust, transparent and acceptable mechanism is clearly cut-out and it is very much there in place but unfortunately it is not reachable to everyone, like full moon in the ocean.

7. Law has carved a sense of duty in tax authority respecting the facts. Let it not neglect, ignore or deviate from such duty. Let it inspire the spirit of sensible boldness at every stage of making decision. The result would be tax due would be much safer in this process rather than suffering in the ICU of litigations. And already the superior courts are overburdened with needless tax litigations and when looked at the history of success rate, 70% of the judicial rulings are rendered in favour of the tax payers on merits.

8. Decision is what defines the personality and magnanimity. Being in the elegant society, one has to be honest with his opinions to feel, experience and realise what kind of decisions are more sustainable, meaningful and purposeful. Consequently unilateral and ghastly decisions get evaporated spontaneously. The process of making right decision is science and translating it into actions is an art. There is a sense of obligation on the part of tax authority instead of sticking to only one side of the coin [revenue, revenue & revenue]. In reality, both sides of coin enjoy the same face value, revenue and justice.

9. The objective of making decisions reminds me of epic “Mahabharata”, a reality but more than that it is a philosophy. Following couple of illustrations are quoted for the benefit of removal of the minds troubled by fixed dusky dust. The readers of this article may raise a question of the relevancy of nexus between epic “Mahabharata” and tax decisions? The nexus is not out of context, but very much inspiring to consciously make right decisions in the best interest of people’s welfare, virtuous administration and defence of fair tax system that society has been relentlessly fighting for since ages.

Illustrations:

A.The episode known as Yaksha Prashna in epic Mahabharata relates to the exchange of questions and answers between Yama in the guise of a Yaksha who poses very difficult questions to Yudhishthira who gives the most fitting answers. Yudhishthira wanted Nakula to be brought back to life fallen dead after drinking water in the lake without the permission of Yaksha. Yaksha asked him why he was asking Nakula, the son of Madri, to be brought to life instead of Bhima or Arjuna who were his own super heroic brothers being Kunti's children. Yudhistira gave stunning answer. He added mother Kunti has three sons, whereas mother Madri has a single son. So he chose Nakul.

 What a caring decision for cousin mother Madri forfeiting his own super heroic brothers! Is it possible to imagine such an unprecedented decision these days?

B. In the Udyoga Parva of the Mahabharata, Yudhishthira sends an offer of peace to Prince Duryodhana and in the course of doing so he names the five  villages like this:

We are desirous of peace; give us even a single province of the empire. Give us even Kusasthala, Vrikasthala, Makandi, Varanavata and for the fifth any other that you like to let there be peace between Pandavas and their cousins, the Kouravas. Here again Yudhisitir chose only five villages, where Duryodhana attempted to kill Pandavas deceitfully, in place his own greatest empire.

“Less is more”, the most contentful and peaceful message, the timeless moral of his generous and forgiving decision.

C.In a final attempt at securing peace, Sri. Krishna returned with the Pandavas' final proposal: the Pandavas would give up all claims to Indraprastha and Hasthinapura in exchange for five villages. Scoffing, Prince Duryodhana said he will not even give even a needlepoint of land to the Pandavas without realising the horrendous consequences on the entire empire. Here Prince Duryodhana exhibited his very very selfishness for other’s empire [property], low thinking and foolish arrogance in the presence of Sri. Krishna without realising that, the doors of death were already opened with wide arms for his entire fraternity in the upcoming ruthless war against injustice.

This is the best example of how a worst decision should not be.

D. When the Great War was inevitable [between 5 senses symbolising the Pandavas and 100 vikaras (substances) representing the Kouravas ruled by born blind king and his incredible well-wishers chose to remain blind], the clever Arjun chooses Sri. Krishna [the inner divine voice] to be his charioteer in place of millions of arms and army parting them to Prince Duryodhana, who was really starving for it. Because the shrewd Arjun very well knew that, Sri. Krishna is the lord of all lords, whereas arms and army are certainly perishable. Later the chariot of dharma was driven by Sri.Krishna himself and reinstated virtuousness by killing the evil and self-centred royal descendants the way they deserved besides millions of army.

This is the price of reinstatement of virtuousness the society has to pay during all the times, then,now and future also.

E.The fabulous iconic royal descendants and great preachers who deprived of senses remained mute witnessing conspiracy, unholy and deceitful rule of the Kauravas contrary to the well-established set of moral and ethical standards of  rule of the Kings, who were recognised as the incarnation of Lord Vishnu. And at the end, the Kouravas left immoral practice which is a bugle call for the present society to change towards the right side. This has manifested how not to be one’s own worst enemy besides being brutally killed in the greatest war of that time between two groups of cousins for the sake of sharing property!

 Such examples of killing of family members for sharing of property are prevalent everywhere. And no family is exception for this kind of disputes.

Moral of examples.

 Sri.Krishna could have stopped the greatest war but he did not do it consciously. Because he knew “war for peace” was essential to re-establish truthful rule and he did it. So also constant fight against unjustifiable decisions under taxation is essential.

The man of right intents and right actions surely meets with success. If success becomes impossible, one should remove the difficulties that bar his way to success. The person who is proactive, shrewd and skilful is sure to reap success and enjoy prosperity. Intelligent persons engaged in good acts with confidence in themselves respect all who differ on thoughts.

Inspiring lessons:

10. In the Kurukshetra battle, the inevitable result was the colossal loss of millions of lives and the ruthless killing of enlarged ego of the intellectuals helplessly and hopelessly remained silent watching blind rulers for defending individual selfishness at the loss of justice. Every royal descendant and the royal preacher fought for self-centred motive rather than to preserve and protect humility, chastity, honesty and truth. Consequently they invited brutal massacre in cruel manner never ever seen and heard. Such classic examples of  both noble intents and conspired and unholy decisions are immortal to the human society as constant red flag and therefore they are more relevant for the present times witnessing extremely vulnerable conditions.

11.So also as long as one who promotes himself as super intellectual and is on the wrong and unholy side of governance, the inevitable result has to be the same, the ruthless massacre of justice. And again after war, truth rises like phoenix and justice returns to its place but at very expensive cost of losing innocent men and materials.

12. Therefore making of decisions is most important to defend truth on real time basis rather than being loyal to blind, self-centred and maladministration. The honesty and care for justice lies in making decisions that defines not only the personality of tax authority but also decides the fate of other innocent persons in the entire chain of events. It is not the personal decision of tax authority but the decision of the statutory institution per say which matters more significant, meaningful and purposeful in the process of delivery of justice. The law guides and clean intent supports tax authority to make right decisions at right time in place of mundane decisions irrelevant to the prevalent facts and law.

13. The need of the time is to realise from all dimensions the consequences  before taking any decision, whether it is in the good of law, justice or otherwise. So tax authority is expected to take scientific decisions based on “cause and effect principle” rather than empty decisions. As already discussed, decisions mirror the honesty, positivity or toxicity or self-centred personality of the authority. Decision is conscious process of accepting truth manifest on either side of the dispute. Virtuous decisions reflect the uncontaminated mind-set of the person.

14.Refusal to accept truth is like dismantling the foundation of justice without knowing how to rebuild it. And it is an unhappy journey to the burial of facts and the outcome would be total mess that brings greater injustice than before. Obesity of personal ego is the root cause for fallible decisions under tax regime. Recently litigants are forced to watch fight between one set of egos against another set of egos scapegoating facts and truth. The decision decides what one is and what one is not irrespective of his personal and professional position.

15. Mindless decisions are capable of hurting heart. So cool and composed moment is the springboard for sustainable and justifiable decisions. What the corporate world expects is, let the decision stem from clean and clear mind to serve the objective of the lawmakers without perturbing about its consequences. To avoid needless disputes, it is better know what one does not know which surely paves the bright and shining path for making justifiable decisions.

16. Indeed decision making process is graceful self-introspection, self-transformation like “caterpillar to colourful butterfly” rather than self-objectification which reduces the person less than his own version. This is universal and natural process.

Baby bird needs egg shell to grow but it can’t survive if it remains inside the shell for longer than enough time. So is the self-objectification like baby bird in egg shell for very long period. The effect is bird never comes out alive. This is the slow process of deconstruction of oneself. Alternatively wisdom dispels illusion, manifolds quest for reality and increases empathy. In a way, this exercise is like chipping away the unwanted portions attached to the mind-set. This makes the decision more authentic and authoritative. Thoughtful decisions by organising relevant facts are expected from tax authorities. Let such optimisms translate into reality within the framework of law.

17. It is pertinent to mention here the Constitutional Scheme of taxation.

Article 265. Taxes not to be imposed save by authority of law.

No tax shall be levied or collected except by authority of law.

18. Parameters of Taxation:

 A legislative enactment which provides for the imposition of a tax must specify the following parameters of taxation:

i) The taxable event which forms the basis of levy, also referred to as ‘subject’ of a tax;

ii) The measure of the tax;

iii) The rate/s of taxation;

iv) The incidence of the tax.

 The components of tax, as stated above have been characterized by the Hon’ble Supreme Court in its judgement dated 26/04/1985 rendered in the case of GOVIND SARAN GANGA SARAN VERSUS COMMISSIONER OF SALES TAX AND OTHERS - 1985 (4) TMI 65 - SUPREME COURT The relevant portion of the judgement [supra] is extracted hereunder:

 “The components which enter into the concept of a tax are well known. The first is the character of the imposition known by its nature which prescribes the taxable event attracting the levy, the second is a clear indication of the person on whom the levy is imposed and who is obliged to pay the tax, the third is the rate at which the tax is imposed, and the fourth is the measure or value to which the rate will be applied for computing the tax liability. If those components are not clearly and definitely ascertainable, it is difficult to say that the levy exists in point of law. Any uncertainty or vaguenesss in the legislative scheme defining any of those components of the levy will be fatal to its validity”.

19. Further the Hon'ble Supreme Court time and again laid down, “Truth is the guiding star. Fair adjudication is voyage of discovery of truth. The truth alone triumphs and every endeavour has to be made to discover the truth and make justice.”

20.The ratio of the above rulings more aptly applies to tax litigations. Genuine tax payers are entitled to parity in view of disparity made by the fallible decisions. The record is self-demonstrative of facts arising out of genuine transactions. Despite, these days the success or failure of litigations depends upon two factors: how the facts are articulately presented by the litigants and how clever, conversant and experienced is the tax authority to realize and accept them.

21. Fortunately tax authorities do not expect fish to climb tree otherwise every unmanageable things. The serious worry is, let there not be mockery of valorous facts. These days, the Appellate Tribunals and superior court are witnessing loads of litigations connecting fallible decisions of tax authorities by disregarding the law and overlooking the sentiments of genuine tax payers. For instance, one set of facts see absolute failure in the hands of lower tax authorities whereas the same set of facts get appreciated and accepted by the superior forums. Why the same set of facts is not accepted by the lower authorities is the worrying question? This might be due to the fearfulness, unawareness and inexperience besides other deficiencies.

22. The law never wants to make profit by excessive use of powers resulting in the forfeiture of facts. In that eventuality, it has to be called as “proceeds of unlawful decisions”. Certainly, this is not an object and true purport of tax law. But it has been happening relentlessly. The reason for misconduct is obvious. The absence of watchful eyes, fear of accountability and personal responsibility for fallible decisions is the main cause for increasing unfairness. When the intellectuals become ineffective, inefficient, self-objectified driven by huge ego identities and step out of line, it is better to vacate their positions voluntarily or otherwise.

23. The often repeated saying is “Justice delayed is justice denied”. But in many cases, justice is never delivered, much less delayed. If tax authorities take lawful decisions, there is no doubt that fairness would witness flying heights. The character and integrity of tax authorities is as essential as the robust legal mechanism. No tax payer would dare to question the decisions taken under the strict framework of law. Looking at the warehouse of litigations, this is certainly a mirage!

24. According to existing research, the ratio of trade to GDP has increased over time, a clear sign of the Indian economy‘s rising integration with the global economy. These days, the nation has been witnessing the record collection of GST breaking its own previous growth rates. This is possible because of buoyancy of nation’s economy and the robust tax mechanism in place. Undoubtedly complete credit should go to the finest compliance of tax laws by the honest business giants besides the sharp jaws embedded under the GST Acts.

 25. I am sure my personal views are the same of those whose heart cheer for honesty and integrity at all levels. The greatness of honesty and integrity depends upon unadulterated decisions and such decisions depend upon sensible mind. Sensible mind stems from clarity of thoughts. And clarity of thoughts spring from mindfulness. Behaving like robots in tax administration is not only fruitless, meaningless but also damaging. Every fact looks different from different perception at different times. But the fact remains static and absolute when seen with clear vision. It is high time to remove rust gathered on the inner vision to see the facts brighter than before.

To put the entire discussion in a single line; for making right decisions, first of all, self-awareness is essential. Otherwise the same old wheel rotates gathering spikes on its path.

26. Moving back to the ethics and essence of the Kurukshetra war, now also seen on daily basis everywhere in diverse versions repeats to remove the evil minds. But one should have patience to welcome Sri.Krishna like divine characters to eliminate the evil characters. Time would decide everything.

Conclusion.

A.These days the fear of stringent tax law is scarier rather than its executors. The law always mandates for real revenue to be sustainable at all levels and clash with unreal revenue. So the tax authorities are expected to continuously improve efficiency and effectiveness, think twice and make sensible decisions before venturing out to unreal and unsustainable revenue. In this digital world, information and data is moving faster than time. So let the tax authority be like lively river of fresh water and not swimming pool.

B. The modern and robust tax mechanism in place to be best-positioned to meet the needs of an ever-increasing demand for sustainable revenue at its best and creating powerful business for transformation of common man’s life. Let the tax authority renovate the daily tax functions into a “best practices” environment.

C. Honey is graciously collected by honey-bees and never by house-flies. So also tax is to be collected like honey-bees quietly without harming the generous, fragrant, attractive and fully blossomed flowers welcoming self-sacrificing honey-bees and never house-flies.

Request:

Tax discipline needs to be strictly enforced to stop vulnerable actions.

Bottomline.

How long one has to wait for the fair decisions and justice? The answer is:

“When a tree does not give shadow, it is advantageous to cut it and plant a new one.”