Finance Minister produced defensive Budget, say experts

An industrialist, a senior tax lawyer and a chartered accountant, doing a post mortem on the Union Budget here on Thursday, eventually zeroed in on the single issue: Who is the Finance Minister actually trying to satisfy while going through the Budget presentation?

Participating in the interactive session organised by the Merchants Chamber of Commerce, senior Supreme Court lawyer, Mr N.K. Poddar, said over 100 amendments have been proposed in direct tax laws, many of which with retrospective effect (going back even 31 years) even as the Finance Minister has promised to place the new income-tax code in Parliament this session, for enactment by 2008-09.

He predicted a productive and busy season for tax consultants across the board as the laws just got more complicated because of the many proposed retrospective amendments.

Search and seizure

Raising the issues of search and seizure provisions and those concerning the Settlement Commission, Mr Poddar said as per the sweeping new dispensation, applications to the Commission can be filed only in cases pending before an adjudicating authority, and an assessee can approach the Settlement Commission only once.

He said the power to grant immunity from prosecution is now proposed to be allowed only for offences under the Excise Act. A time-limit has also been fixed, under which all pending cases before the Commission have to be disposed of before March 31, 2008. And claiming immunity from penalty will cease to exist from June 1, 2007.

Widening of tax net

According to Mr Amitav Kothari, company law expert and Director, LIC of India, the Settlement Commission may well lose its relevance if the provisions go through. He felt it was difficult to understand the tax proposals, including the widening of the service tax net, in a scenario where revenue collections are booming.

Pointing out that with growing fiscal stability the budget exercise was fast losing its importance, Mr Rahul Roy, Director, Ernst & Young India (P) Ltd, said it has somewhat pleasantly belied expectations as corporates were actually readying for a hike in tax rate with zero exemptions to boot.

Even an upward revision in the service tax rates was expected, but the Mr Chidambaram has produced a "very defensive Budget", as rates have remained untouched and there is no mention of the outcomes unlike last year, he pointed out.

Mr R.S. Agarwal, former Chairman of MCC, and Joint Chairman of the Emami Group, presenting the `small industrialists' take on the Budget, described the routine budget analyses as nothing but intellectual entertainment for the experts who flip-flop from one speaking arena to another in a single day, turning the whole exercise into a ritual.

On the 2007-08 Budget, specifically, he said the thrust on education sector should benefit the paper sector.

Budgets, he remarked, have always been good for the paper sector as volumes are brought out explaining the financial nitty-gritty, and the print media simply laps it up, leading to increase in newsprint consumption.

Incidentally, Emami, a personal and health-products major, also has a presence in the paper industry.