Finance Bill: Going beyond the ‘only-tax’ provisions

With a single stroke, the government has moved to amend 40 laws by bringing in amendments in the Finance Bill, 2017. Among the amendments, the government has proposed to make changes to the Income Tax Act to make it mandatory to quote Aadhaar at the time of filing income tax returns or applying for PAN after July 1, 2017. Every person holding a PAN on July 1, and who is eligible to have Aadhaar number shall have to intimate his/her Aadhaar number to the authorities, failing which the PAN of the person will be invalidated and the person will be treated as not having applied for a PAN. As per the amendments, however, the provisions will not apply to exempt persons, as may be notified by the Central government.

The government also removed the cap for companies for their contributions to political parties along with keeping names of political parties confidential in their accounts as part of the amendment to the Companies Act, 2013. At present, companies may contribute up to 7.5 per cent of their average net profits in the last three financial years to political parties. Also, companies are required to disclose the amount of contributions made to political parties in its profit and loss account, along with the name of the political parties to which such contributions were made.

With the amendments to the Finance Bill, 2017, the government has removed the requirement for companies to disclose the name of the political parties to which contributions may have been made, though companies are still required to disclose the amount of contribution.

The removal of cap on political contributions by companies to political parties follows the Budget announcement of introduction of electoral bonds. In his Budget speech last month, along with limiting the cash donation from a person to a political party at Rs 2,000, finance minister Arun Jaitley had announced the proposal to issue electoral bonds through which a donor could purchase bonds from authorised banks against cheque and digital payments.

The government also made an important change to the limit on cash transactions, above which a penalty of an equivalent amount would be imposed by the tax department. The Finance Bill, 2017, had originally proposed the limit to be Rs 3 lakh, which has now been reduced to Rs 2 lakh. According to the Finance Bill, cash transactions above Rs 2 lakh will not be permitted for an individual in a day for a single transaction and for any transactions relating to a single event.

Carrying out a major institutional change through the Finance Bill, the government has not only merged some tribunals, it has also proposed to regulate the appointment process of officers of tribunals. The amendments propose that the government may make rules for qualifications, appointments, term of office, salaries and allowances, resignation, removal and other conditions of service for these tribunals including chairperson, vice-chairpersons and members of specified tribunals, appellate tribunals, and other authorities.

The original version of the Finance Bill had proposed to include an explanation to sub-Sections (1) and (1A) of Section 132 and sub-Section (1) of Section 132 A of the Income Tax Act “to declare that the ‘reason to believe’ or ‘reason to suspect’, as the case may be, shall not be disclosed to any person or any authority or the Appellate Tribunal”, which had led to some apprehensions in the industry.

The Bill had also proposed to provide the tax officials with power of provisional attachment for a period of six months with the prior approval of a senior official.

With these amendments to the Finance Bill, the government has been criticised of bypassing the need to introduce Bills in the Rajya Sabha, where it does not have majority. Finance Bill, being a Money Bill, need not be introduced in Rajya Sabha, where it is sent only for its recommendations. Rajya Sabha can neither reject nor amend the Bill, and must return it within 14 days, after which Lok Sabha may choose to accept or reject all or any of its recommendations. In either case, the Bill is deemed to have been passed by both Houses. Even if Rajya Sabha fails to return the Bill to Lok Sabha within 14 days, under Article 109(5) it is deemed to have been passed anyway.

Under Article 110(1) of the Constitution, a Bill is deemed to be a Money Bill if it contains only provisions dealing with all or any of the following matters: (a) the imposition, abolition, remission, alteration or regulation of any tax; (b) regulation of borrowing by the government; (c) custody of the Consolidated Fund or Contingency Fund of India, and payments into or withdrawals from these Funds; (d) appropriation of moneys out of the Consolidated Fund of India; (e) declaring of any expenditure to be expenditure charged on the Consolidated Fund of India or the increasing of the amount of any such expenditure; (f) receipt of money on account of the Consolidated Fund of India or the public account of India or the custody or issue of such money or the audit of the accounts of the Union or of a State; or (g) any matter incidental to any of the matters specified in sub-clauses (a) to (f).

However, in response to RSP MP N K Premachandran’s objection to inclusion of the amendments in the Money Bill, Jaitley had said in Lok Sabha last week that the word ‘only’ has to be read in the context of the spirit of Article 110. He said it is “much ado about nothing that you say 40 laws are being amended”.