Dear Income-tax Department, `Thank You' For Ruining Indian Economy
SHRI. JAITHIRTH RAO, ENTREPRENEURIAL WHIZ-KID
Jaithirth Rao, renowned entrepreneur, expresses deep anguish at the arbitrary manner in which the income-tax department is harassing Global BPO companies and raising bogus tax demands, forcing them to relocate their operations to foreign countries like the Philippines & China. This short-sighted approach of the income-tax department will ruin the Indian economy, he warns
Jaithirth Rao, entrepreneurial whiz-kid, has launched a blazing attack on the income-tax department for its arbitrary policies which is forcing large blue-chip MNCs to shift their BPOs from India to more reasonable Countries.
In a thought-provoking article in the Indian Express, Jaithirth Rao spoofs a letter from the Finance Minister of Philippines to the Finance Minister of India "thanking" the latter for the "vicious harassment" that the income-tax department has heaped on the Indian IT and BPO industries which has caused a shift of BPO businesses from India to the Philippines.
the income-tax department is raising tax demands on captive units of global companies using their global profits as the basis and points out that this one decision alone would cause several of these companies not only to stop growing their Indian subsidiaries, but actually start winding them down
Jaithirth Rao points out that the income-tax department has launched a `concerted strategy` over the past several years by making frequent and arbitrary changes in rules and says that this has resulted in "vicious harassment" of Indian IT and BPO industries.
In sarcastic & death-gallows humour, Jaithirth Rao says that Philippines counts the Indian income-tax authorities amongst its "best friends" and requests that the names of the "worthy individuals" who are behind this "wonderful strategy of weakening this labour-intensive Indian industry" be given so that they can be awarded special "Magsaysay Awards" and be honoured as "Friends of the Philippines".
On a serious note, Jaithirth Rao points out that the Indian income tax authorities are particularly targeting captive BPO companies, which were till recently being regarded as the "poster-boys of Indian I. T. Industry", by asking them to re-compute their taxable profits based on arbitrary and changing transfer pricing guidelines without adequate safe harbour provisions, which are commonplace in most countries.
while in forums like the WTO, India has been vehemently arguing in favour of free movement of labour and opposing the stand of the US political groups that it is not "body-shopping", the income tax department has taken the reverse position that revenues from such activities do not constitute "service exports" and that it really is "body-shopping"
He says that this "capricious behaviour" has resulted in many captive units stopping the growth of their Indian BPO outfits and accelerating the growth of their units in foreign countries.
He also laments that the income-tax department is raising tax demands on captive units of global companies using their global profits as the basis and points out that this one decision alone would cause several of these companies not only to stop growing their Indian subsidiaries, but actually start winding them down.
Jaithirth Rao says these "business-unfriendly" ideas of the income-tax department will shrink the Indian BPO industry and while these "rapacious tax demands" will in due course be struck down by the courts, in the meantime, the companies will have to pay up, be out of cash and will be spending their time and money on expensive tax lawyers instead of focusing on their operating businesses. In this unfortunate state of affairs, all BPOs close shop in India and move to the Philippines and China, he says.
Jaithirth Rao also points out that while in forums like the WTO, India has been vehemently arguing in favour of free movement of labour and opposing the stand of the US political groups that it is not "body-shopping", the income tax department has taken the reverse position that revenues from such activities do not constitute "service exports" and that it really is "body-shopping". He says that the income-tax department's stand "fatally undermines" the sovereign position of the Government and strengthens the hand of the US political groups which wish to impose trade barriers on Indian firms.
The income-tax department is "determined to wreck one of the few industries where India has achieved world class and where Indian companies are considered formidable operators" and their action of reopening past assessments and raising huge untenable demands by terming "service export revenues" as "body shopping revenues" (despite earlier explicit and emphatic assurances that on-site project implementation revenues would be treated as export income) is forcing large & successful world class companies to flee India. He says that this flight of capital is making China & Philippines "salivate" at the prospect of global corporations setting up operations in those countries in preference to India.
As opposed to the unreasonable stand adopted by the income-tax department, the Revenue in Philippines & China have decided to do exactly the opposite and are reasonable in their tax demands, simple and transparent in their transfer pricing rules and generous in their tax holidays, he says.
This Article has been viewed 608 times
This entry was posted on Saturday, March 24th, 2012 at 6:57 am and is filed under Articles. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.
11 Responses to "Dear Income-tax Department, `Thank You' For Ruining Indian Economy"
CA V.Mahaganapathi Says:
March 24th, 2012 at 7:36 am
This article does not require any comment since it is very sharp, clear and to the right direction. It is a alarm cry by those who really love the country. If any official is concerned about the future of India will certainly work towards it. Else we will once again retain the so called name – India A Poor Country – Not in wealth but in wise.
K.VASANTKUMAR, ADVOCATE Says:
March 24th, 2012 at 7:42 am
If people think that Income-tax department is targetting only BPOs and IT Sector they are mistaken. Now it is fancy for the officials of the Income-tax to determine huge incomes and raise huge demands to boast in their friends circle. They resort even to contempt of Supreme Court and violate constitutional provisions and Income-tax provisions. They do not spare even State organisations. There is no accountability. Even the CBDT is a mute spectator and when approached directs the tax payer to go to Commissioner in spite of the fact that such a petition is filed stating that the Commissioner himself is behind raising such demand. It is high time the Ministry does something to help the taxpayers and have a look at high demand cases.
Sanjiv Kumar Says:
March 24th, 2012 at 7:59 am
Absolutely true! Shortsightedness of Tax Department and Govt. policies are going to be fatal for the growth of Indian economy and responsible for flight of job opportunities especially in the current scenario where the cost arbitrage for outsourcing works to India is not so attractive and we are trying to sell high end jobs at substantially higher cost.
Unnecessary harassment by tax department especially in case of transfer pricing issues and retroactive changes in Tax laws etc. creates lot of confusion in the mind of investors as all the tax planning done by investors based on current legal provision at the time of investment in Indian economy goes for toss when the changes is made on retroactive basis. In recent past- two major changes has really made a significant impact on the minds of foreign investors viz. taking away of the tax benefits from SEZ unit by imposing MAT and change in capital gain tax regulation applicable to cases like Vodafone.
RAJIV SAHNI Says:
March 24th, 2012 at 8:36 am
This is only a tip of an iceberg. All Returns being processed by the CPC-ITD at Bangalore of business income in the recent past have a common ITR Processing error. They have not allowed depreciation claim of the businesses resulting in enhanced income being assessed and tax demands being raised, which are not existent. Reason-to show that direct tax collections for the FY 2011-12 nearly match the budget estimates of the FY 2011-12. This is one of the manner in which the data is fudged in preparation of Government Budget.
Vikram Aggarwal Says:
March 24th, 2012 at 8:50 am
Having regard to the size and population of our country, the current litigation system and judicial system is in a very bad state. It is urgently needed to set up National Tax Tribunals. Cases pertaining to 1980s get decided in 2012. Tax uncertainty continues to prevail. Different High Courts continue to give varied decisions on same issues.
Anil Agrawal Says:
March 24th, 2012 at 8:53 am
Rerospective legislation to nail vodafone and come round the Supreme Court Judgement.
I have a suggestion.
Why not have retrospective legislation that there was no 26/11 attack on Bombay and Kasab is an Indian.
Anil Agrawal Says:
March 24th, 2012 at 8:55 am
If the retrospective legislation is overturned by Supreme Court, will Manmohan Singh and Pranab Mukherjee resign?
P. PRASAD Says:
March 24th, 2012 at 9:11 am
The present Indian Income-Tax Law scenario is that, you endeavor in winning the Income-Tax matters in Appeal before the CIT[A] and the Department makes a frivolous appeal before ITAT and you endeavor and manage to get the orders in your favor and no sooner you win the matter, your happiness and efforts are short-liven as the Department makes an amendment and that too retrospective and retroactive. which is highly ambiguous and you land up again in payment of the huge demands raised along with penal interests which are very seldom waived, for which there is a very short limb to waive, which often is not used in favor of the assesses. This is the scenario of Indian Income-Tax Act.
gopal nathani Says:
March 24th, 2012 at 9:41 am
there are remedies available against every action of the department. it is not appropriate to make negative publicity of this kind and it is to some extent defamatory and not in national interest. an ITO is a government officer who would apply the Act provisions and nothing outside it. and there are built in provisions , treaties, board circulars, instructions etc. to regulate the law. and and excesses can be dealt with appropriately. until such time the vodafone ruling had come no one said anything like this about the department. it is not as if the hardships are faced by only BPO'S even domestic companies have to fight their case. lets take the case of units set up in Himachal Pradesh of which some are found to be bogus being set up for taking tax shelters. I know of genuine units having to estalish their manufacturing by fighting their case all through till ITAT and beyond. does that mean the department is ruining any image of the country. not at all. many a times and almost in most cases the ITOs do harass but I wonder whether such things do not happen anywhere in the world. on the retrospective anmendments let the Courts deal with it as and when they form into a legislation if challenged.
Sunil Ingale Says:
March 24th, 2012 at 9:43 am
The Babus wii be babus. They never decide a case on merit. Instead they are always afraid of their accountability. More than 70% cases are decided against the Department. The CIT (Appeal) reports to CCIT, who has revenue collection target. How can CIT(Appeal) be fair in his approach?
ram babu b.com Says:
March 24th, 2012 at 9:54 am
A Govt. which gives importance to the `Cinema-people'(compromise with every social value to give a message to the society- for the sake of money) can't be expected to re-act on the problems like this. They hardly understand cumulative effect of this kind of actions.
Few days back when supreme court made some comments for maintaining so mcuh stocks of rice without any protection , Our great former RBI Governor, Former Finance Minister, present Prime Minister with so many appreciations by the world known universities said that the courts are interfering too much.
Now the Govt. of A.P. is offering rice for rs.1/- kg scheme. (you can guess which party would benefit) He encouraged it.
these kind of Selfless stalwarts can't be expected to take note of the situation.
Mhatma Gandhi is an ideal person to these people as they can efficiently and legally test the patience of the people. If they can't wait – they have to pay price.
(LIKE THOSE WHO WANT REFUND ORDER EARLY) IF you point out anything they simply say that we have gone to their office to `argue'.
The people who never realise how much money they are enjoying demand from the tax payers as if it is due for the past few generations.
SHRI. JAITHIRTH RAO, ENTREPRENEURIAL WHIZ-KID
Jaithirth Rao, renowned entrepreneur, expresses deep anguish at the arbitrary manner in which the income-tax department is harassing Global BPO companies and raising bogus tax demands, forcing them to relocate their operations to foreign countries like the Philippines & China. This short-sighted approach of the income-tax department will ruin the Indian economy, he warns
Jaithirth Rao, entrepreneurial whiz-kid, has launched a blazing attack on the income-tax department for its arbitrary policies which is forcing large blue-chip MNCs to shift their BPOs from India to more reasonable Countries.
In a thought-provoking article in the Indian Express, Jaithirth Rao spoofs a letter from the Finance Minister of Philippines to the Finance Minister of India "thanking" the latter for the "vicious harassment" that the income-tax department has heaped on the Indian IT and BPO industries which has caused a shift of BPO businesses from India to the Philippines.
the income-tax department is raising tax demands on captive units of global companies using their global profits as the basis and points out that this one decision alone would cause several of these companies not only to stop growing their Indian subsidiaries, but actually start winding them down
Jaithirth Rao points out that the income-tax department has launched a `concerted strategy` over the past several years by making frequent and arbitrary changes in rules and says that this has resulted in "vicious harassment" of Indian IT and BPO industries.
In sarcastic & death-gallows humour, Jaithirth Rao says that Philippines counts the Indian income-tax authorities amongst its "best friends" and requests that the names of the "worthy individuals" who are behind this "wonderful strategy of weakening this labour-intensive Indian industry" be given so that they can be awarded special "Magsaysay Awards" and be honoured as "Friends of the Philippines".
On a serious note, Jaithirth Rao points out that the Indian income tax authorities are particularly targeting captive BPO companies, which were till recently being regarded as the "poster-boys of Indian I. T. Industry", by asking them to re-compute their taxable profits based on arbitrary and changing transfer pricing guidelines without adequate safe harbour provisions, which are commonplace in most countries.
while in forums like the WTO, India has been vehemently arguing in favour of free movement of labour and opposing the stand of the US political groups that it is not "body-shopping", the income tax department has taken the reverse position that revenues from such activities do not constitute "service exports" and that it really is "body-shopping"
He says that this "capricious behaviour" has resulted in many captive units stopping the growth of their Indian BPO outfits and accelerating the growth of their units in foreign countries.
He also laments that the income-tax department is raising tax demands on captive units of global companies using their global profits as the basis and points out that this one decision alone would cause several of these companies not only to stop growing their Indian subsidiaries, but actually start winding them down.
Jaithirth Rao says these "business-unfriendly" ideas of the income-tax department will shrink the Indian BPO industry and while these "rapacious tax demands" will in due course be struck down by the courts, in the meantime, the companies will have to pay up, be out of cash and will be spending their time and money on expensive tax lawyers instead of focusing on their operating businesses. In this unfortunate state of affairs, all BPOs close shop in India and move to the Philippines and China, he says.
Jaithirth Rao also points out that while in forums like the WTO, India has been vehemently arguing in favour of free movement of labour and opposing the stand of the US political groups that it is not "body-shopping", the income tax department has taken the reverse position that revenues from such activities do not constitute "service exports" and that it really is "body-shopping". He says that the income-tax department's stand "fatally undermines" the sovereign position of the Government and strengthens the hand of the US political groups which wish to impose trade barriers on Indian firms.
The income-tax department is "determined to wreck one of the few industries where India has achieved world class and where Indian companies are considered formidable operators" and their action of reopening past assessments and raising huge untenable demands by terming "service export revenues" as "body shopping revenues" (despite earlier explicit and emphatic assurances that on-site project implementation revenues would be treated as export income) is forcing large & successful world class companies to flee India. He says that this flight of capital is making China & Philippines "salivate" at the prospect of global corporations setting up operations in those countries in preference to India.
As opposed to the unreasonable stand adopted by the income-tax department, the Revenue in Philippines & China have decided to do exactly the opposite and are reasonable in their tax demands, simple and transparent in their transfer pricing rules and generous in their tax holidays, he says.
This Article has been viewed 608 times
This entry was posted on Saturday, March 24th, 2012 at 6:57 am and is filed under Articles. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.
11 Responses to "Dear Income-tax Department, `Thank You' For Ruining Indian Economy"
CA V.Mahaganapathi Says:
March 24th, 2012 at 7:36 am
This article does not require any comment since it is very sharp, clear and to the right direction. It is a alarm cry by those who really love the country. If any official is concerned about the future of India will certainly work towards it. Else we will once again retain the so called name – India A Poor Country – Not in wealth but in wise.
K.VASANTKUMAR, ADVOCATE Says:
March 24th, 2012 at 7:42 am
If people think that Income-tax department is targetting only BPOs and IT Sector they are mistaken. Now it is fancy for the officials of the Income-tax to determine huge incomes and raise huge demands to boast in their friends circle. They resort even to contempt of Supreme Court and violate constitutional provisions and Income-tax provisions. They do not spare even State organisations. There is no accountability. Even the CBDT is a mute spectator and when approached directs the tax payer to go to Commissioner in spite of the fact that such a petition is filed stating that the Commissioner himself is behind raising such demand. It is high time the Ministry does something to help the taxpayers and have a look at high demand cases.
Sanjiv Kumar Says:
March 24th, 2012 at 7:59 am
Absolutely true! Shortsightedness of Tax Department and Govt. policies are going to be fatal for the growth of Indian economy and responsible for flight of job opportunities especially in the current scenario where the cost arbitrage for outsourcing works to India is not so attractive and we are trying to sell high end jobs at substantially higher cost.
Unnecessary harassment by tax department especially in case of transfer pricing issues and retroactive changes in Tax laws etc. creates lot of confusion in the mind of investors as all the tax planning done by investors based on current legal provision at the time of investment in Indian economy goes for toss when the changes is made on retroactive basis. In recent past- two major changes has really made a significant impact on the minds of foreign investors viz. taking away of the tax benefits from SEZ unit by imposing MAT and change in capital gain tax regulation applicable to cases like Vodafone.
RAJIV SAHNI Says:
March 24th, 2012 at 8:36 am
This is only a tip of an iceberg. All Returns being processed by the CPC-ITD at Bangalore of business income in the recent past have a common ITR Processing error. They have not allowed depreciation claim of the businesses resulting in enhanced income being assessed and tax demands being raised, which are not existent. Reason-to show that direct tax collections for the FY 2011-12 nearly match the budget estimates of the FY 2011-12. This is one of the manner in which the data is fudged in preparation of Government Budget.
Vikram Aggarwal Says:
March 24th, 2012 at 8:50 am
Having regard to the size and population of our country, the current litigation system and judicial system is in a very bad state. It is urgently needed to set up National Tax Tribunals. Cases pertaining to 1980s get decided in 2012. Tax uncertainty continues to prevail. Different High Courts continue to give varied decisions on same issues.
Anil Agrawal Says:
March 24th, 2012 at 8:53 am
Rerospective legislation to nail vodafone and come round the Supreme Court Judgement.
I have a suggestion.
Why not have retrospective legislation that there was no 26/11 attack on Bombay and Kasab is an Indian.
Anil Agrawal Says:
March 24th, 2012 at 8:55 am
If the retrospective legislation is overturned by Supreme Court, will Manmohan Singh and Pranab Mukherjee resign?
P. PRASAD Says:
March 24th, 2012 at 9:11 am
The present Indian Income-Tax Law scenario is that, you endeavor in winning the Income-Tax matters in Appeal before the CIT[A] and the Department makes a frivolous appeal before ITAT and you endeavor and manage to get the orders in your favor and no sooner you win the matter, your happiness and efforts are short-liven as the Department makes an amendment and that too retrospective and retroactive. which is highly ambiguous and you land up again in payment of the huge demands raised along with penal interests which are very seldom waived, for which there is a very short limb to waive, which often is not used in favor of the assesses. This is the scenario of Indian Income-Tax Act.
gopal nathani Says:
March 24th, 2012 at 9:41 am
there are remedies available against every action of the department. it is not appropriate to make negative publicity of this kind and it is to some extent defamatory and not in national interest. an ITO is a government officer who would apply the Act provisions and nothing outside it. and there are built in provisions , treaties, board circulars, instructions etc. to regulate the law. and and excesses can be dealt with appropriately. until such time the vodafone ruling had come no one said anything like this about the department. it is not as if the hardships are faced by only BPO'S even domestic companies have to fight their case. lets take the case of units set up in Himachal Pradesh of which some are found to be bogus being set up for taking tax shelters. I know of genuine units having to estalish their manufacturing by fighting their case all through till ITAT and beyond. does that mean the department is ruining any image of the country. not at all. many a times and almost in most cases the ITOs do harass but I wonder whether such things do not happen anywhere in the world. on the retrospective anmendments let the Courts deal with it as and when they form into a legislation if challenged.
Sunil Ingale Says:
March 24th, 2012 at 9:43 am
The Babus wii be babus. They never decide a case on merit. Instead they are always afraid of their accountability. More than 70% cases are decided against the Department. The CIT (Appeal) reports to CCIT, who has revenue collection target. How can CIT(Appeal) be fair in his approach?
ram babu b.com Says:
March 24th, 2012 at 9:54 am
A Govt. which gives importance to the `Cinema-people'(compromise with every social value to give a message to the society- for the sake of money) can't be expected to re-act on the problems like this. They hardly understand cumulative effect of this kind of actions.
Few days back when supreme court made some comments for maintaining so mcuh stocks of rice without any protection , Our great former RBI Governor, Former Finance Minister, present Prime Minister with so many appreciations by the world known universities said that the courts are interfering too much.
Now the Govt. of A.P. is offering rice for rs.1/- kg scheme. (you can guess which party would benefit) He encouraged it.
these kind of Selfless stalwarts can't be expected to take note of the situation.
Mhatma Gandhi is an ideal person to these people as they can efficiently and legally test the patience of the people. If they can't wait – they have to pay price.
(LIKE THOSE WHO WANT REFUND ORDER EARLY) IF you point out anything they simply say that we have gone to their office to `argue'.
The people who never realise how much money they are enjoying demand from the tax payers as if it is due for the past few generations.
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