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| J&K industrialists mostly claim 'Bogus' income tax deductions, says report on black money | | | Syed Junaid Hashmi
JAMMU, Sept 22: Union Finance Ministry should revisit plethora of exemptions and deductions in the Income Tax Act being given to Industrialists who have established income generating units in various parts of Jammu and Kashmir.
Deductions of income tax being claimed by industrial units in Jammu and Kashmir are bogus. These stringent recommendations have been made by "Committee on measures to tackle black money in India and abroad" which submitted its report to the Union Ministry of Finance in March 2012. A copy of the report is with Early Times.
The nine member committee was headed by Chairman of Central Board of Direct Taxes (CBDT) Dr. Poonam Kishore. Committee has made specific mention of Jammu and Kashmir while recommending for review of continued tax exemptions being enjoyed by industrialists who have established units in both the regions of State.
Making a mention of tax free zones or tax holidays which have been created in J&K, the committee has said that deductions u/s 80IA/80IB of the Income Tax Act being claimed by Industrial Units are bogus. Mostly Industrial Units allegedly operating from these zones are actually not operating, and if they operate they show higher profits during the years of entitlement for claiming deductions under Income Tax Act, which is not commensurate with trade results in similar lines of business outside such zones.
The committee has further said that soon after the tax free period is over, the same business shows sharp drop in returns. From the field experience, committee has stressed that such zones are merely conduit to channelize unaccounted profits of other regions without paying any tax on the same.
Committee has recommended that suitable amendments should be made in the income tax and other related laws to plug this loop hole. It has said that plethora of exemptions and deductions in the Income Tax Act also need a revisit while adding that profit linked deductions are prone to misuse as they encourage diversion of income from taxable activities to such activities where deduction from income is available.
Referring to scheme envisaged by Central Government to provide incentive in respect of Central Excise duty to units located in J&K, committee has said that in the case of J&K, this scheme is being operated by way of refund of Central excise duty paid in cash on finished goods. It has added that refund scheme provides double benefit in view of the fact that the buyer of the goods gets Central Value Added Tax (CENVAT) credit also and further it is prone to misuse.
Committee has identified that in Jammu and Kashmir, over production is shown in order to get more refund of excise duty and clandestinely removed goods, on which no central excise duties have been paid, are regularized and find their way into the mainstream without payment of any taxes and at the same time input credit is availed using invoices of units located in these States.
Committee has further said that in most of the cases, inputs are shown procured from traders to avoid credit of the Central Value Added Tax to maximize refund and this modus operandi facilitates diversion of inputs to other units located in tax zones( particularly to Small Scale Industrial (SSI) units). Following this, committee has proposed that exemption from Central excise duty may be provided to units located in J&K and refund scheme may be done away with. |
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