Don't abandon Dirext Taxes Code: Parliamentary panel to govt

Committee says it is not convinced with govt's logic that there was 'no great merit' in going ahead with the DTC

Asking the government not to abandon the Direct Taxes Code (DTC), a Parliamentary panel today said this new law needs to be enacted to replace the existing Income Tax Act, which it said was "very cumbersome" and prone to avoidable litigation.

"The government should go ahead with the DTC with its good provisions and implement the same within a stipulated deadline along the lines of the GST regime," said the Standing Committee on Finance said in its report, which was tabled in Parliament today.

Headed by M Veerappa Moily, the committee said it is not convinced with the government's logic that there was "no great merit" in going ahead with the DTC as most of its provisions were incorporated in the present Income Tax Act.

The report said that the existing IT Act "is considered a very cumbersome statute, fraught with complexities and several ambiguities prone to capricious interpretation and avoidable litigation."

The DTC, which sought to replace the IT Act of 1961, was drafted by the previous UPA government.

The committee also underlined the need for preparing a time-bound plan to realise the tax arrears which are not disputed and can be collected.

It also suggested that officials should be held accountable for failure to collect undisputed tax arrears.

The quantum of undisputed or uncollected arrears in direct taxes in 2012-13 was Rs 1,06,610 crore, which rose to Rs 1,32,055 crore in 2013-14. In case of indirect taxes, such arrears in 2012-13 was Rs 63,139 crore, increasing to Rs 76,159 crore in the next fiscal.

"The huge pendency of tax arrears clearly shows failure of tax policy and administration", the report said.

Although taxes should be collected in a fair and judicious manner, "strict action should be initiated against tax evaders and dodgers, as well as those colluding with them," it said.

With regard to rising tax refunds, the committee suggested that the government should provide for interest liability of tax refunds in the budget.

As much as Rs 89,060 crore was refunded in direct taxes during 2013-14, up from Rs 83,766 crore a year ago. In case of indirect taxes, the quantum of refund during 2013-14 was 23,662 crore as against Rs 19,274 crore in the previous fiscal.