Disallowance of State Levies as Eligible Deductions from Income Under The Income Tax Act - Jaya objects
IN a memorandum submitted to the Prime Minister yesterday, Tamil Nadu Chief Minister Jayalalithaa stated:
The Finance Bill 2013, contains an extremely retrograde, anti-federal provision. Clause 7 of the Bill amended Section 40 of the Income Tax Act which has made any levy by a State Government by way of privilege fee, license fee, royalty etc., on State Public Sector Undertakings not deductible for the purpose of computation of income. All such levies are legitimate statutory levies and as such were deductible from the income of the State Public Sector Undertakings under Section 37 of the Income Tax Act.
Clause 7 of the Finance Bill 2013 is objectionable because:
++ It amounts to an indirect taxation of the income of State Governments and hence is violative of the spirit of Article 289 of the Constitution of India which exempts the property and income of a State from Union taxation.
++ It is discriminatory as it applies only to State PSUs but not to Central Public Sector Undertakings.
++ As presently worded it gives very wide discretion to Income Tax Authorities to interpret it in an arbitrary manner.
Clearly this provision is ill-conceived and misguided and has no place in a federal polity like ours. I request the Hon'ble Prime Minister to revisit the issue and nullify the impact of Clause 7 of the Finance Act 2013, when the Main Union Budget for 2014-15 is presented.
While the issue is serious, Amma's draftsmen have been callous like all babus. The Finance Bill 2013 does not exist any more - it is the Finance Act 2013 and the clause is not 7.