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CII urges Budget Man Sinha to simplify income tax system

The Confederation of Indian Industry has suggested that the Income Tax Act, 1961 be simplified and redrafted so as to create a more assessee-friendly regime while achieving the basic goal of revenue generation for the government.

In its pre-budget proposal for 2000-01, the chamber stated a new Income Tax Bill should be introduced at the earliest as numerous changes have been made to the Act from time to time.

These changes, according to the CII, have been made in a sporadic manner to cater to short-term goals without taking a holistic, long-term view.

As it stands today, the Act is a complex document comprising around 530 sections. Due to its complex nature, the Act has become difficult to interpret and is now leading to a tremendous amount of unnecessary litigation, the chamber proposal said.

The CII also emphasised the need to tax the income of rich farmers and commercial operations in agriculture.

Legal opposition to taxing agricultural income has been based on the premise that the power to levy such a tax vests exclusively in the states, and that the states are unlikely to agree to a constitutional amendment to abdicate this power to the central government.

This constitutional issue needs through examination. No doubt, the power to tax agricultural income has been bestowed on state governments through Article 246 (3) read with Entry 46 in List II of the Seventh Schedule of the Constitution. However, a dialogue needs to be started with the states on this crucial issue, the chamber said.

Moreover, according to Article 366 of the Constitution, CII has pointed out, agricultural income tax has been defined as ''agricultural income as defined for the purpose of the enactments relating to Indian income tax.''

Therefore, the definition of agricultural income under the Income Tax Act is relevant not only for itself, but also for the purpose of the Constitution.

Therefore, it needs to be examined whether the definition of agricultural income could be suitably altered in the Income Tax Act to bring at least some sections of agriculture under the income tax net

There is no constitutional barrier for taxing agricultural income by amending the definition of this phrase in the Income Tax Act, 1961. However, legal opinion on this issue should be obtained by the government from the attorney general and other constitutional experts, the CII statement said.

UNI

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