Relief for top management including foreign partners, directors in tax matters
January, 15th 2022
In a major relief for taxpayers, especially where the company’s senior directors, foreign partners etc got summoned by the tax authorities, Bombay High Court recently observed that appearance of company representatives to be treated at par with appearance of top management.
Often during investigations, senior directors and foreign directors are asked to physically appear before the tax officers and thus it used to become difficult for the India Inc to make it possible.
Bombay High Court was hearing a matter where the court gave an exemption to the top management, foreign partners/ directors from appearing before the taxman in cases of tax dispute inquiries.
The observations were made when the court was hearing the matter between the customs authorities and ZT India.
ZT India is a prominent importer and supplier of mechanical hardware and the customs department had issued summons to international directors to appear before the tax authorities for alleged recurring import duty evasion.
ZT in it’s plea said that foreign and Indian directors to be represented through authorized representatives or advocates. Also virtual hearing for foreign directors should be considered at a later stage, if required.
Senior directors and foreign directors were required to appear inspite of cooperation from the authorised representative of the petitioner. It was argued before the court that the jurisdiction of the officer issuing the summons need to be tested. Further, when authorised representative is appearing, there is no need for the senior directors and especially the foreign directors to appear physically before the officer.
“The intention of the Parliament and the government has been very clear to assist the businesses and improve the ease of doing business rating of India. However, in various cases, the executive action is completely against various circulars which are issued time and again with respect frequency of the summons, the timing of the summons and various measures which need to be taken into account for issuing such summons in the rarest of rare cases. However, board guidelines are ignored in various cases and this action needs to tested before writ Courts.” said Abhishek A Rastogi, Partner at Khaitan & Co, who argued in Bombay High Court for the petitioner.