News Update

CII projects 7.7% growth in current fiscalDRI nabs two persons with about 6 kg ivoryIBBI Chief calls for preserving reputation of fledgling institutionService Matter - Relief to Ashok Aggarwal - Disciplinary authority cannot approve initiation of enquiry by ignoring statements of witnesses and merely relying on gist of evidence forwarded by CBI: HCCCI invites public comments on merger of Linde & Praxaire-Way Bill for Intra-State movement of goods - State tally goes up to 27PM inaugurates Delhi-Meerut ExpresswayTax benefits to angel investors - CBDT inserts Clause (Viib) in Sec 56India generates 940 tonnes of plastic waste every day: Dr Harsh VardhanAnti-dumping duty imposed on ‘Saturated Fatty Alcohols' imported from Indonesia, Malaysia and ThailandGovt stipulates 8.5% interest rate on PFRule 11UA - Word 'or an accountant' omitted + Clause (viib) of Section 56(2) not to apply to consideration received by a Company for issue of shares that exceeds face value of such shares if received from an investorI-T - Taxable event arises as soon as interest income on bank deposits accrues & becomes due; Deferred receipts on instruction of depositor will not make it hypothetical income: HCFM is out of ICU; recovering fast after kidney transplantAnti-dumping duty on on'Ammonium Nitrate' - Notification 44/2017-Cus(ADD) amended to substitute name of exporter at sr. no.1 as 'Euro Chem Trading GMBH Through Rawfert Offshore Sal, Lebanon'Finance Commission team to visit Kerala on coming MondayWTO Chief calls for reducing trade tensionsNIC cloud-based data centre to go live in OrissaCBIC clarifies on application of IGST on goods supplied while deposited in Customs bonded warehousePublic comments sought on Draft NDCP till June 1, 2018PM lays foundation stone for Patratu Super Power ProjectI-T - It is not open for AO to make additions while framing assessment u/s 143(3) merely on basis of seized documents beyond period of limitation u/s 153A: ITATIndia to rope in international labs for food testingISC Panel finalises recommendations of Punchhi CommissionCBIC introduces monetary limits of Rs.2.50 lakhs for filing Revenue appeals before Commissioner(A); applicable to CX & ST legacy cases and those currently pending.Govt sanctions out of turn coal to PSUs; Private plants find themselves at receiving endACC appoints JS, TRU, Alok Shukla as Minister (Customs) in PMI to WTO at GenevaACC grants one more year extension to CBDT Chairman Sushil ChandraThere is no provision in the CGSTAct which allows exemption on an Input Service if the Output service provided by taxable service is exempt: AARServices provided to M/s Karnataka Power Transmission Corporation Ltd. – since it is company registered under the Companies Act, 1956, and not a State Government authority, benefit of concessional rate @12% not available: AARServices provided of diagnosis, pre and post counseling therapy qualify to be health care services and attract Nil rate of Tax: AARTransaction of transfer of one of the units of the applicant as a going concern amounts to supply of service – Nil rate under 12/2017-CT(R): AAR
Piecemeal initiatives like Demonetisation can't kill black money & bribery

NOVEMBER 11, 2016

By TIOL Edit Team

THE Government's decision to demonetise Rs. 500 and Rs 1000 notes has evoked mixed reactions - very strong support from some quarters and muted to cynical criticism from others.

The trade-off between the benefits of so-called surgical strikes on black money and collateral damage to law-abiding citizens is hard to gauge. Reckon the collateral damage as colossal time loss inflicted on the masses and acute discomfort to persons in tight situations such as making payments to private hospitals and chemists and organizing solemn events such as marriages. Factor in temporary disruption in economic activities that are largely cash driven.

Demonetisation is thus like chemotherapy that harms not only cancerous cells but all cells that are essential to sustain life in a human being. And as often happens in such treatment, supposedly eradicated cancerous cells return to harm the body (read economy) with vengeance after a few years. Black money and its cousin corruption are cancers of the worst sort.

The fact is that demonetization puts whole economy and society to great deal of inconvenience just for the sake of punishing a section of holders of black money. Demonetisation affects only those who did not convert their black money into bullion and diamonds, real estate and other expensive assets.

"Demonetisation curbs the white economy and will also curb the black economy in a credit constrained regime," concluded a working paper titled 'Aggregate Demand with Parallel Markets' published by National Institute of Public Finance and Policy (NIPFP) in 1989.

It is perhaps because of this conviction that successive governments including Vajpayee Government avoided the soft option of demonetization. It is certainly soft as compared to organizing frequent searches and seizures at premises of suspected black money operators/tax evaders/bribe takers; regular surveillance of ministers and officials at bribery-prone jobs, shedding all discretionary powers and ordering double audit of sensitive transactions and giving full autonomy to enforcement agencies including Lok Pal, which remains unborn after about 40 years of labour. Don't forget other hard options for rulers- introducing simple, stable and durable tax regime and reducing controls to a bare minimum.

If the country's experience with previous two instances of demonetisation of high denomination notes - 1st in 1946 & 2nd in 1978, the amount of black money eradicated this time might also be small.

It is here pertinent to quote Finance Ministry-commissioned 1985 study on black money. Captioned 'Aspects of the Black Economy in India', the study by National Institute of Public Finance and Policy (NIPFP), stated: "crude index of the penal success of this measure is given by the value of high denomination notes which were not presented for conversion. By this yardstick, neither venture was success."

The study added: "Quite apart from the relatively paltry results obtained on the two occasions on which it has been tried, there are other good reasons to doubt the efficacy of this measure in combating black income generation."

The reasons are: 1) The measure is limited to inflicting penalties on those who hold their black wealth in the form of cash at the moment of demonetisation. 2) Second, even for holders of cash, there exist avenues for converting high denomination notes into lower valued ones, at discount, through intermediaries. 3) Demonetisation does not strike at various root causes of generation of black money. 4) It disturbs only temporarily the black economy and serves an opportunity for black economy stakeholders to be on guard in future.

We can safely assume that these four factors have not been disputed by three black money studies commissioned by UPA Government and tightly kept under the carpet by NDA Government. In any case, cannons of good governance require the Government to make public three studies submitted by NIPFP, National Council of Applied Economic Research (NCAER) and National Institute of Financial Management (NIFM) more than a couple of years back.

Public expects Modi Government to crack the whip on politicians and top officials who largely avoid black money net by engineering a web of cashless corrupt practices. These can be in the form of quid pro quo deals with favoured corporate houses.

Such deals run into several crore of rupees. They take the form of equity investments, consultancy fees and corporate social responsibility donations to entities controlled by persons close to favour-dispensing ministers and officials. Some of these benefiting entities are registered abroad including tax havens.

This brings us to larger issue of Government's reluctance to unveil a comprehensive strategy to fight twin and related evils of black money and corruption.

In the absence of multi-facet and integrated approach to rooting out corruption and black money, piecemeal and easy options like amnesty schemes for tax evaders and demonetisation would leave these evils to survive and hit back like antibiotics-resistant pathogens.

Also See : TIOL TUBE Videos on Black Money Saga

Simply inTAXicating - Black Money Saga



Making & Faking Of Indian Rupee- Episode 1

Making & Faking Of Indian Rupee- Episode 2

Also See : TIOL TUBE Videos on BLACK MONEY

Black Money Bill