PREVIOUS HOUR

kgg/3m/5.00

SHRI P. CHIDAMBARAM (contd.): He asked me: What would I like to be? On what measures I would like to be judged? The correct question is: What measure should a Government be judged? There are some universally accepted measures. The first and the most easly understood is growth. We can judge ourselves against the growth which happened 30 years ago or 40 years ago. That would be a futile exercise. Let us judge this Government on the growth that has happened in the Government that preceded it, the immediate previous Government.

The NDA was in office between 1998-99 and 2003-04. There were two Finance Ministers; one for the first five years and one in the last year; Mr. Jaswant Singh is not here, I would have paid him a compliment. I said in one of my speeches, he is a lucky Finance Minister unlike his predecessor. In the five years under your first Finance Minister, the average growth was 5.32 per cent. I think, that number must be burnt into your memory so that you can use it again, 5.32 per cent. In the last year, the growth did pick up to 8.25 per cent, and I will tell you why. Even if you take an average for all the six years, it is 5.85 per cent. The average of the three years of the UPA Government is 8.6 per cent, a good 2.8 per cent more than the average recorded in the six years of the NDA Government. That is one measure which you can use to judge us.

The other measure is how well we manage the macro economy. In 1997-98, the revenue deficit was 3.1 per cent. When you came into office, the previous year, the revenue deficit was 3.1 per cent. When you left office, the revenue deficit was 3.6 per cent. Likewise, the fiscal deficit, when you came into office, the previous year, it was 4.8 per cent. When you left office, the fiscal deficit was 4.5 per cent. While there was some improvement in the fiscal deficit by 0.3 per cent, there was deterioration in the revenue deficit from 3.1 to 3.6 per cent. In the three years of the UPA Government, we have brought the revenue deficit down to 2.0 per cent and the fiscal deficit down to 3.3 per cent. Any economist anywhere in the world will tell you that the Government can be judged on these measures.

Now, let us look at the sectoral growth. In industry, when the NDA left office, the industrial growth was 7.4 per cent in 2003-04. Since we came into office, the industrial growth in three years has been 9.8, 9.6 and 10 per cent. Let us look at services. When the NDA left office in 2003-04, the services sector grew by 8.5 per cent. In the three years of this Government, it is 9.6, 9.8 and 11.2 per cent. When the NDA left office, gross capital formation was 28.03 per cent. For the last year, for which the figures are available, 2005-06, it is 33.7 per cent. The gross domestic savings, when the NDA left office in 2003-04, it was 29.67 per cent; figures for 2005-06 are, it is 32.43 per cent. I think, Sir, by every measure, any economist anywhere in the world will say that the economic management by this Government has been far better, far more productive, has made the economy stronger; and, that is why, he will find that we have some problems which are attributable to high growth, to which Dr. Bimal Jalan referred.

I agree, inflation is a problem and I will deal with it. No one is disputing that we cannot have inflation of 6 per cent. The tolerance level for inflation in India has come down and that is good. (Contd. by sss/3n)

-KGG-SSS/3N/5.05

SHRI P. CHIDAMBARAM (CONTD.): In the 80s and 90s, we had inflation, double-digit inflation. But people would not tolerate inflation of anything more than four or five per cent these days. That is a good sign. People are asking Government why is inflation about four and a half or five per cent. That is a very good sign. Now, inflation in 2006-07 has been an average of 5.4. But, in 1998-99, average inflation was 5.9. In 2000-2001, average inflation was 7.2. Even in 2003-04, average inflation was 5.5. In fact, when the NDA handed over power to the UPA Government, inflation had already crossed six on that day. The then Government moderated inflation thereafter, after these peaks had been touched. And I am confident the steps that I will take, I will inform the House, will moderate inflation. Sir, I would request Mr. Jaitley to judge us on measures which are universally accepted and by any measure, clearly, the economy of this country is stronger at the end of three years of the UPA Government than ever before. Mr. Jaitley asked me, 'where is the big idea'? Let me tell you Sir, the days of big bang Budgets are over. We cannot have big bang Budgets any more. In fact, in one of the pieces on that collection you will find that I say that the days of big bang Budgets are over. Reforms are now 16 years old. Reforms have taken root. New reforms can only come in unreformed sectors or it can only be incremental reforms in sectors which have already witnessed reforms. But, if you want to know what new ideas and purely new ideas, as you were speaking, I sat down and listed all the news ideas that were announced in the last four Budget speeches. I am willing to read out this long list and I ask you to match this list by a list of new ideas that were announced in six years of the NDA. Even before the first Budget, we announced doubling of agricultural credit in three years. That is not a purely new idea but it is an ambitious idea where we will double agricultural credit in three years. We did it in two years and two months. Upgrading of I.T.I. is a new idea. Five hundred I.T.I.s plus 1396 I.T.I.s to make it world class is a new idea. Restoring water bodies was an ambitious idea. In fact, I was scoffed in this very House by one of your colleagues and today, the first agreement with the World Bank and the Government of Tamil Nadu has been concluded for 2182 crores. The second agreement with the World Bank and Government of Andhra Pradesh will be signed in the next couple of weeks. The third agreement will be with Karnataka and, I think, the fourth is with Orissa or Bengal and one by one all the water bodies in this country will be restored. The notification of FRBM was a new idea. It is a bold idea. Yes, the law was passed in NDA Government's time but it did not have the courage to notify it. We notified it even before the first Budget was presented and because we notified it, we have fiscal discipline throughout the country. All the States put together, by the end of last year, when final figures come, would have wiped out the revenue deficit and they will be ahead of meeting the fiscal deficit target. They will be ahead by two years. The States' economy is much stronger today because we notified the FRBM and we persuaded all States to pass their fiscal responsibility. Gender Budgeting is a new idea. Outcome Budget is a new idea. The National Rural Employment Guarantee Scheme with a guarantee is a new idea. The National Rural Health Mission, the Backward Regions Grant Fund are new ideas. The Vaidyanathan Committee Report with a 13,596 crore outlay to revamp all the cooperative institutions of this country which are in shambles is a new idea. The Jawaharlal Nehru Urban Renewal Mission is a new idea. Mumbai, as an international financial centre is not only a new idea, it is a radical, bold, ambitious idea. It may take five years, it may take seven years but it is a new idea. To give a 100 crore to one university, to make it an institute of excellence is a new idea. (Contd. by NBR/3O)

-SSS/NBR-MCM/3O/5.10.

SHRI P. CHIDAMBARAM (CONTD.): A new FAB Policy, a new Policy for IT Hardware is a new idea. A new policy for Petrochemicals and Petroleum is a new idea. The Ultra Mega Power Project is bold new idea. Where in the world has any country attempted a 4,000 MW power project? The National e-Governance plan is a new idea. The Aam Aadmi Bima Yojana is a new idea. It is a beginning to deal with the problems of unorganized workers. Reverse mortgage is a new idea. Separating the Debt Management Office from the RBI is a new idea. There are a number of new ideas. But, I am surprised that Mr. Jaitley did not refer to the major tax reforms attempted in the country in the last three years. Let me tell you, without boasting, the most important tax reform attempted in over eighty years is the successful introduction of VAT throughout the country. Barring one State and one Union Territory, all the States of this country have come around to VAT and we did so. We did not have the power. The power to impose VAT is under List-2, Entry-54. But, through an Empowered Committee mechanism, which was constituted by the NDA Government, we persuaded all the States to come to VAT and, while the previous Government talked about VAT every year, we successfully accomplished the introduction of VAT throughout the country. And, from there, we have taken the next step to phase out the CST. The phase out began from the 1st April this year. And, we have set a goal that from the 1st of April, 2010, this country will go to GST. From a cascading ST regime, we have moved to VAT. We have begun the phase out of CST. And, we have announced a date for introduction of GST. Is it not a major reform? We have abolished CENVAT for textile sector. We have given inter se credit between service tax and excise duty so that we can prepare ground for GST. The last major revision of direct taxes I did in 1997. The next major revision was done, again, in 2005-06. Between 1997 and 2005, no one has attempted to tamper or tinker with those tax brackets. We have got the Annual Information Report which is a major tool. We have got TIN which Dr. Bimal Jalan referred to. Now, we have got the electronic data interchange in customs. All these are major tax reforms. The tonnage tax for shipping industry might look small. But, it is a single instrument which has given a big fillip to the shipping industry. Yesterday, we had announced abolition of customs duties for all diamonds and, we believe, it gives a big fillip to gems and jewellery industry and promote employment in this country. So, I think, if you look at ideas, tax reforms, there are major ideas. I am not even referring to for want of time the reforms that have been done in the financial sector and in the capital market.

Sir, now, let me deal with tax revenues. There was a criticism that we are not doing much by way of collecting revenues. There is a criticism in the Opposition that I am a 'High Tax Finance Minister.' I don't understand what Mr. Jaitley meant when he said that I am a 'High Tax Finance Minister.' In the NCMP we said and I quote, "The Government will initiate measures to increase the tax to GDP ratio.' Is that a good goal or not? You said it. We have said it. Just before the NDA Government took over, the tax to GDP ratio, excluding the VDIS revenue, is 8.5 per cent. In 2003-04, the last year of NDA Government, the ratio was 9.2 per cent. Thus in a period of six years, the tax to GDP ratio increased from 8.5 per cent to 9.2 per cent. In the three years of UPA Government, the tax to GDP ratio has increased from 9.2 per cent to 11.5 per cent. Of this, the ratio of direct taxes to GDP is 5.6 per cent. So, for the first time, in the recent memory, I mean, nobody in the department has a contrary view, actual tax collections have exceeded both the Budget Estimates and the Revised Estimates.

(CONTD. BY USY "3P")

-NBR-USY/3P/5.15

SHRI P. CHIDAMBARAM (CONTD.): The gross tax revenue was Rs. 4,71,742 crores. It has exceeded the Budged Estimates by Rs. 29,589 crores, and the Revised Estimates by Rs. 3,894 crores. This has been done by expanding the base of taxpayers, by more efficient tax administration, and motivating taxpayers to comply with the tax laws. If I were a high-tax-Finance-Minister this should have left less money in the pocket of citizens, this should have led to lower savings, this should have led to lower investments. If I had collected more than what I should collect, if we had appropriated more than what we should legitimately take, the natural result should have been less money in the hands of savers and less money in the hands of investors. But look at the figures again. The savings rate has increased from 29.7 per cent in 2003-04 to 32.4 per cent in 2005-06, which is the last year for which figures are available. The investment rate is increased from 28 per cent in 2003-04 to 33.8 per cent in 2005-06. In fact, in 2006-07, when the figures come, I have no doubt in my mind, I will be very surprised if these rates are not further increased. Sir, I am not a high-tax-Finance-Minister. I may have invented a few taxes. But these are only new to India. These taxes are prevalent all over the world. I may have got a wider alphabetic soup of taxes. But eventually what we are doing is, only taxing those sectors where tax exemptions had played havoc with tax collections. All of you said, one time or the other, in your speeches, "Remove tax exemptions". Some of you also said, "But, give us this tax exemption". The point is tax exemptions must go. If perquisites are not taxed that is because of an exemption; if fringe benefits are not taxed that is because of an exemption. Therefore, what we are doing is, tax perquisites, tax fringe benefits, which means, we are only removing exemptions. I am not a high-tax-Finance-Minister. This Government is not a high-tax-Government. It is leaving more money in the hands of citizens, as reflected by the savings ratio. It is leaving more money in the hands of investors, as reflected in the investment ratio. Please ask Mr. Rahul Bajaj, please look at the CMI figures. Every year, the amount of investment, which is announced, which is committed, and which is in the pipeline with the CMI, it tracks very carefully and puts out every month, is showing a secular rise. There is an investment boom in this country. And, this investment boom can only take place if savings are high and people are willing to invest. So, this Government is not a high-tax-Government. I reject that argument. We have collected more taxes because of more efficient tax administration, and because, I say with fairness, people are willing to comply with tax laws better. They think that the better policy is a policy of honesty -- 'Let us pay our taxes'. Sir, every argument about taxes revolves around exemptions. If you remove the overburden of all the arguments and go to the core of the arguments, you will find the argument boils down to this -- why have you removed my exemption; why have you curtailed my exemptions; why have you not enhanced my exemptions? You have heard people saying Uttarakhand and Himachal Pradesh should not have been given the exemptions. But, in the same breath, you heard them saying, "Give the exemptions to Kutch; give the exemptions to North Bengal". The point is, sometimes decisions are forced by a combination of circumstances. But, in the long run, this country will be better served if exemptions are played down, tax rates are moderate, the taxpayers' base is increased, and everyone pays a legitimate and right share of tax. To answer Mr. Rahul Bajaj, I maintain that 19.2 per cent corporate tax is a low rate. The scheduled rate is 33 per cent. The corporates, therefore, should pay a tax rate of pretty close to 30 or 33 per cent.

(Contd. by 3q -- PK)

PK/5.20/3Q

SHRI P. CHIDAMBARAM (CONTD.): But the effective rate we find is 19.26 per cent. This is only because of the variety of exemptions that we have. It is the intention of this Government to periodically review the exemptions and ensure that the corporate sector also pays its legitimate share of tax. Mr. Bajaj raised the question that he is paying a lot by FBT; it is not so. Let us look at the figures. In 2005-06, Corporate tax was Rs.1,01,277 crores, FBT was Rs.4,749 crore; total was Rs.1,06,026 crore. As a proportion of the total tax paid, it is only 4.48 per cent.

SHRI RAHUL BAJAJ: It is very irritating.

SHRI P. CHIDAMBARAM: No, no, we will come to that. In 2006-07, the proportion is declined to 3.56 per cent. So, FBT is not a major burden. FBT may be irritating to somebody who prepares your tax return; you only sign it, I know. The point is you are not preparing the tax return. The point is FBT is not a burden. FBT simply captures income which has escaped tax; FBT captures income which legitimately ought to come to tax. So, FBT is not a burden. In fact, in my first speech to industry after the Budget where FBT was introduced, I had said, the FBT will only be between three and four per cent. If you apply it to your effective rate of 19 per cent, what is 4.48 per cent on 19 per cent; what is 3.56 per cent on 19 per cent? It is less than one per cent. Therefore, I don't think FBT is a burden. We are trying to capture income which otherwise should be subject to tax through FBT. If the corporate tax rate moves up closer to 30 per cent, surely, we can revisit this, but, at the moment, I think, it is important that some of these incomes which escape tax, because of various exemptions, should be captured.

Sir, I have a duty to raise tax revenues. In fact, there are Ministries, Departments which have to spend money; there is only one Ministry which has to raise money. Therefore, I have a duty to raise tax revenues. Now, the demand for expenditure is raising every day. Given the commitment of the UPA Government to inclusive growth and given the need to finance social-sector expenditure, the need for resources is growing every year. For example, Plan expenditure has increased. I am only comparing the last year of the NDA Government and the Budget for the current year so that you will get an idea of the scale of expenditure. The Plan expenditure has increased from Rs.1,22,280 crore in 2003-04 to Rs. 2,05,100 crore in 2007-08. Within Plan expenditure, Sir, many key sectors have witnessed a sharp increase in Budgetary support as we enter the fourth year of the UPA Government. Let me give you a few examples. I am comparing 2003-04 with 2007-08. Let us take agricutlure - it was Rs.3,262 crores in 2003-04; now, it is Rs.8,090 crores; education - it was Rs. 7,024 crores in 2003-04, now it is Rs, 28,672 crores -- a four-fold increase; Rural Development and Land Resources -- it was Rs.11, 320 crores in 2003-04, now, it is Rs.29,000 crores; drinking water --it was Rs.2,750 crores in 2003-04, now it is Rs.7,560 crores; Road Transport and Highways - it was Rs.7,236 crores in 2003-04, now it is Rs. 14,066 crore. Virtually, in every sector, we have either doubled, trebled or quadrupled the expenditure. I have to raise resources. On the Non-Plan side, I will give you an example, like Defenc -- Rs.65,300 crores in 2003-04; now, Rs.96,000 crore in 2007-08. Above all, grants to State Governments -- it was Rs.18,369 crores in 2003-04, now it is Rs.38,403 crores. Hon. Members may also kindly note that out of every rupee of tax revenue collected by the Central Government, approximately, 30 per cent goes to the States and the Union Territories. Just to give you an idea, Sir, of the size of the transfer envelope, in 2003-04, net resources transferred to States and UTs was Rs.1,26,623 crores; in 2008, it will be Rs.2,48,844 crore.

(Contd. by 3R/PB)

PB/3R/5.25

SHRI P. CHIDAMBARAM (CONTD.): Therefore, I have a duty to raise revenues. We are doing it by expanding the tax-payer base, by more efficient tax administration and, I say, supported by the higher degree of compliance by all sections of tax-payers for which I am grateful to all tax-payers.

Sir, let me now just deal with some of the major issues. Dr. Jalan said that we have more taxes than most other countries. But that is not entirely true. I have a list of taxes which the United States levies. They have a Central Corporate Tax, in many States, there is State Corporate Tax; they have a Central Personal Income Tax, in virtually every State, there is an additional personal Income Tax. There are social security taxes, there is estate duty, there is dividend tax, there is capital gains tax on equity. Now, what are our taxes which are very different from these taxes? In fact, world-over, these are the taxes. There are several countries in the world which have a perquisite tax. There are several countries in the world which have export duties. I do not think we have any more taxes than in any other country. I agree, maybe, our Income Tax Code is too complex, thanks to the numerous amendments made year after year. That is why I have said that we are towards the last lap of drafting the Code. After Parliament adjourns, I hope, I will have enough time to read the Code and change it myself. But I am confident that before calendar 2007, if not in the Monsoon Session but, by the end of the Monsoon Session, I should be able to introduce a new Income Tax Code in Parliament.

Sir, my friend here said, I must raise the threshold exemption for personal income tax. I am sorry, I can't do it. If I raise the threshold exemption, it applies across the board to three lakh tax-payers and I will lose too much revenue. Let us look at the comparative record of the threshold exemption. In 1997-98, just before the NDA came into office, the threshold exemption was Rs. 40,000. When they laid down the office, the threshold exemption was Rs. 50,000. In six years, the exemption was increased by Rs. 10,000. In addition, of course, there was a standard deduction of Rs. 30,000. So, the effective exemption was Rs. 80,000. After the UPA Government came into office, in 2005-06, I raised the threshold exemption to Rs. 100,000. So, in the second year of this Government, we have raised it by Rs. 20,000 to Rs, 100,000; besides we continued with exemption of up to Rs. 9,600 per year for transport allowance and up to Rs. 15,000 for medical reimbursement. Further more, the tax brackets were recast radically. As against the ten per cent rate for income over Rs. 50,000, the ten per cent rate now applies for income over Rs. 1 lakh. And, as against the twenty per cent rate for income over Rs. 60,000, the twenty per cent rate now applies for Rs. 1.50 lakhs. So, if you take the tax bracket and the tax rate, we have given a substantial relief to every tax-payer. This year, we increased the threshold exemption by another Rs. 10,000. In fact, indirectly, it takes note of the inflation. The inflation in two years has been 9.72 per cent cumulative and a ten per cent increase, indirectly, takes account of inflation. We will look at threshold exemptions in future. But compliance has to improve. I repeatedly said, moderation of tax rates is directly related to the improvement of compliance. Let me tell you about compliance. How many people admit to an income of more than ten lakhs? In 2003-04, the number was 97,500. In 2005-06, we estimate the number to be -- and I think this is more or less correct -- 1,40,000. Now, I think, this is ridiculously low. As compliance improves, I assure the House, the tax rates will be moderated or exemption limits will be revisited. But, at the moment, the compliance is improving, and I am confident, the compliance will improve. As compliance improves, we will revisit these rates.

Sir, there were some questions about the Backward Regions Grant Fund. Please refer to the Budget speech. It was Rs. 5,000 crores last year. This year, it is Rs. 5,800 crores. (Contd. by 3s/SKC)

3s/5.30/skc

SHRI P. CHIDAMBARAM (CONTD.): Sir, there was some question about Section 80-P. I think, there is a lot of misinformation about Section 80-P. I pointed out that out of roughly 1,11,000 cooperative institutions, 1,09,000 are exempt; it does not apply to them at all. The Budget Speech said so and I have repeatedly clarified it in many letters and many answers to Parliament. The total number of cooperative institutions which come under the tax net is about 2700 or so, of which only about one thousand and odd make profits. In Section 80-P, you are liable to pay income tax only if you make a profit -- and there are only 1200 and odd cooperative institutions in this country which make profits -- they are liable to pay income tax. Now, why did we bring this? We all know what happened in the State of Gujarat largely, but also in Andhra Pradesh, also in Mumbai, in Maharashtra and some other States. Any number of cooperative societies were defrauded by the people and management. There was no regulatory supervision; there was no accounting supervision; they were not subject to any tax regulations and so, nobody looked into their books of account.

SHRI EKANATH K. THAKUR: Regular reports are filed and income-tax returns are filed every year.

SHRI P. CHIDAMBARAM: Please, you have made your point. (interruption) I am aware of the numerous scandals...(interruption)...

SHRI EKANATH K. THAKUR: You cannot say that there was no compliance.

MR. DEPUTY CHAIRMAN: Please, let him complete.

SHRI P. CHIDAMBARAM: There was no way to scrutinise any of that because there was no tax liability. The regulatory supervision was left to the State Registrar of Cooperative Societies, and hundreds of scandals and scams have occurred. I know personally; the Gujarat Government has put number of persons in jail; there are very eminent people of Gujarat ...(interruptions)..

SHRI EKANATH K. THAKUR: There are scandals even in public sector banks. (Interruptions)

SHRI P. CHIDAMBARAM: Mr. Ekanath, let us not bring in each one's personal experience, because then I can quote from personal knowledge of cases where people have been put in jail for defrauding hundreds of people; very eminent people have been put in jail! The point is, the only way to bring some kind of accounting and regulatory supervision was to bring them under the tax net. But, please remember, after doing that, we have also extended 36-18 benefit to you. We have also extended tax neutral status amalgamations and mergers. So, we have extended all the concessions that can be extended to cooperative societies, because there are 1200 societies, which make profit -- if they don't make profit, there is no income tax -- pay tax. But to say that every cooperative institution in this country is subject to tax is factually wrong. Ninety-eight-and-a-half per cent of cooperative institutions are not affected by Section 80-P.

Sir, there was some question about CASA deposits as to why you can't lend. Well, in CASA deposits you have got a 25 per cent SLR, you have got a 6.5 per cent CRR; you have got risk rate to be allotted, you have got 40 per cent priority sector lending. But CASA deposits are more then pre-empted by these regulatory and prudential requirements. Banks have been encouraged to lower the interest rates but whenever the Reserve Bank, for variety of reasons, mainly to fight inflation, raises the bank rate, it has an impact. Bank rates have varied in this country; it is not as though home loan rates have gone up only in the UPA Government regime. Let us take the State Bank of India's benchmark floating rate for home loans; in 1998-99, it was 14 per cent. Memories may fail, records don't fail. In 1998-99, SBI's benchmark home loan rate on a floating basis was 14 per cent; next year, it was 14.5 per cent. Then, by 2003-04, it came down to 8.25 per cent. It has since risen to 10 per cent and this year, it has risen to 11.5 per cent. I am not disputing it, but this is merely a reflection on the trend of inflation. As inflation is moderated, these home loan rates will also moderate. Eighty per cent of home loan borrowers borrow less than 10 lakhs; the average is about 8 lakhs. And we have taken care to see that for 80 per cent of home loan borrowers the interest rates do not go up; the Reserve Bank has reduced the risk rate and I have told banks to hold the interest rates for bank loans of less than Rs. 20 lakhs. (Contd. by 3t/hk)

HK/3T/5.35

SHRI P. CHIDAMBARAM (Contd.): Sir, there is only one point which I need to answer and this is the point raised by Shri Tapan Kumar Sen and an amendment to which he has issued notice. I am afraid if the amendment that he has issued notice is carried, you will be in a worse off position. Then you will go back to the unamended Section 17 of the Income Tax Act, which is worse off. Firstly, I want you to kindly understand the history of Section 17. There is a long history to this Section, but I am going to read it to you in two minutes. I think, it is very important that you know what the history is. Then, I will explain what the Supreme Court judgement is. Since 1987-88, that is, for the last twenty years, Sir, -- you will appreciate it; you must have seen the Section sometimes or other -- the rent-free or concessional rent accommodation was taxed at 10 per cent of salary or the fair market rent, whichever was less minus the rent actually paid. Nobody challenged it at that time. This was the law for the last twenty years. In 2001-02, the NDA Government dropped the concept of fair market rent and then the Section read, "Ten per cent of salary minus the rent actually paid." The rate was 10 per cent of salary if the population was above a certain number and 7.5 per cent if the population is below a certain number. But the fair market rent concept was dropped and this provision was in force. Tax was paid by everybody occupying concessional accommodation. This provision was challenged in various High Courts. The High Courts upheld this provision. I want you to know that the High Court held that this provision was valid. Some employees appealed to the Supreme Court. Pending the appeals in financial year 2005-06, I, and I admit the responsibility, increased the rate to 15 per cent and 20 per cent. But I did not touch the basic structure of the Section. Only the rate was changed. In 2005-06, nobody complained about the rate. In fact, Parliament approved that amendment. All of us approved that amendment. But I take responsibility for that rate. In a recent judgement, the Supreme Court disposed of the appeal and contrary to popular belief in a section, the Supreme Court did not strike down the rule; the Supreme Court held that the rule is intra vires. It is held that the levy of tax on concessional accommodation is correct. All that the Supreme Court has said while interpreting Section 17 is: The Assessee has a right to prove that he was not given a concession. Now, I refer you to paragraph 62 onwards of the judgement and it says that the assessee will have a right to prove that he has not been given a concession. I will read that sentence. It says, "It is, therefore, open to the assessee to contend that there is no concession in the matter of accommodation provided by the employer and the case is not covered by Section 17(2)." But then the Supreme Court said, "The way to get over it is for you to introduce a deeming provision. If you introduce a deeming provision and have a rate, then, nothing more to it. Now, if I had accepted the judgement, what would have happened? If I had accepted this judgement, every single case will be a case of litigation. Every single assessee, who is the occupant of the house, would have to go before the assessing officer and prove that the case is not falling under Section 17. Thousands and thousands of assessments would have been blocked in litigation. So, what have I done? We have taken the Supreme Court's guidance. We have introduced the deeming provision, and, therefore, we have got rid of litigations. At the same time, I admit that, once I do that, the 15 per cent, 20 per cent rate appears to be little burdensome. Therefore, I have given relief. What I have done by way of amendment is correct. Having done the amendment, the amendment is perfectly in order. The amendment, in fact, saves assessees from numerous litigations running into several years. Every assessing officer will start hearing assessees why is your case not falling under section 17. Therefore, the amendment is perfectly in order. However, in response to representations, I am going back on the 15 per cent and 20 per cent. What I am now doing is, earlier the population limit was 4 lakhs. Now, if the population is above 25 lakhs, the rate will be 15 per cent. Between 10 to 25 lakhs, the rate will be 10 per cent and below 10 lakhs, the rate will be 7.5 per cent. (Contd. by 3u-sk)

SK/3U/5.40

SHRI P. CHIDAMBARAM (Contd.): You would have seen today's newspaper. Every single person gets substantial relief. And, I am giving retrospective effect to this amendment from 2005-06, the year in which I brought the amendment. I am giving retrospective effect to it so that what was done in 2005-06 is now undone. You have a lower rate and you are free from litigation. Concessional accommodation has always been taxed for twenty years. We are continuing that situation with a lower rate of tax. Therefore, I would request Mr. Tapan Kumar Sen to withdraw his amendment. In fact, if I accept his amendment, the position would be, the provision earlier in the Act will be restored and the Supreme Court judgement will come into play and that will mean unnecessary harassment and enormous inconvenience to assessees. I think, I have covered most of the points raised by the hon. Members. With regard to the concessions, all the concessions were announced in the Lok Sabha. They have been reported in the newspapers. With this, I request that the Finance Bill be returned.

MR. DEPUTY CHAIRMAN: I shall now put the motion regarding consideration of Appropriation (No. 2) Bill, 2007 to vote. The question is:

"That the Bill to authorise payment and appropriation of certain

sums from and out of the Consolidated Fund of India for the services of the financial year 2007-08, as passed by Lok Sabha, be taken into consideration ".

 

The motion was adopted.

 

MR. DEPUTY CHAIRMAN: We shall now take up clause-by-clause consideration of the Bill.

 

Clauses 2 to 4 were added to the Bill.

The Schedule was added to the Bill.

Clause 1, the Enacting Formula and the Title were added to the Bill.

 

SHRI P. CHIDAMBARAM: Sir, I move:

 

That the Bill be returned.

 

The question was put and the motion was adopted.

 

MR. DEPUTY CHAIRMAN: I shall now put the motion regarding consideration of Finance Bill, 2007 to vote. The question is:

"That the Bill to give effect to the financial proposals of the Central

Government for the financial year 2007-08, as passed by Lok Sabha, be taken into consideration".

 

The motion was adopted.

 

MR. DEPUTY CHAIRMAN: We shall now take up clause-by-clause consideration of the Bill.

Clauses 2 to 10 were added to the Bill.

MR. DEPUTY CHAIRMAN: We shall now take up Clause 11. There is one amendment by Shri Tapan Kumar Sen and Shri Moinul hassan.

SHRI P. CHIDAMBARAM: Sir, I would request the hon. Member, in view of my explanation, to withdraw the amendment.

SHRI TAPAN KUMAR SEN: The matter is so serious that a number of representations have been made up to the Prime Minister, not only by the Parliamentarians but also by the workers throughout the country. I am not challenging the logic and the explanation of the hon. Finance Minister. But, the thing is that the workers for availing quarters are forgoing a substantial part of their income. So, I will only request to consider to lessen the burden.

SHRI P. CHIDAMBARAM: For 20 years, concessional accommodation has been subjected to a tax. Certain rates were there up to 2005-06 and I increased the rates. We have now reduced the rates. The rates used to apply for population of 4 lakhs, now the rates apply to a population of 25 lakhs. We have reduced the rates. Everybody is getting the relief. And, this is minus the actual rent paid. In fact, let this amendment, as approved by the Lok Sabha, go through, then, if my hon. friend has any grievances, let him represent.

SHRI TAPAN KUMAR SEN: My only request is for your reconsideration of the whole thing.

MR. DEPUTY CHAIRMAN: He is giving the assurance.

SHRI P. CHIDAMBARAM: I keep an open mind. You can always make another representation after your friends have told you the impact of the amendment. You make another representation. I have an open mind.

SHRI TAPAN KUMAR SEN: Okay, I am not moving.


MR. DEPUTY CHAIRMAN: I shall now put Clause 11 to vote.

Clause 11 was added to the Bill.

Clauses 12 to 144 were added to the Bill.

The First Schedule, the Second Schedule, the Third Schedule, the Fourth Schedule, the Fifth Schedule and the Sixth Schedule were added to the Bill.

 

Clause 1, the Enacting Formula and the Title were added to the Bill.

 

SHRI P. CHIDAMBARAM: Sir, I move:

 

That the Bill be returned.

 

The question was put and the motion was adopted.

(Ends)

(Followed by 3w-ysr)

3W/HMS-YSR/5.45

MR. DEPUTY CHAIRMAN: Half-an-Hour Discussion.

00 ׻ֵ : ָ, ֬ ә ֓ ־ָ և Sir, let it be on Monday. Sir, it will take time. It cannot be sorted out in two hours.

ֳ֯ן : ֟ ߅

׻֟ ֟ : ָ, ֯ , ־ֻ פ 6 ֕ ?

SHRI S.S. AHLUWALIA: Sir, the point is that the discussion on the Master Plan of Delhi cannot be over by half an hour. It will take some more time. (Interruptions)

ߴ֟ ִ þָ֕ : ָ, ־ֻ , Ϭ֮ ӡ , ־ֲ Ϭ֮ ӡ ? ...(־֮֬)... ָ, ־ֻ , Ϭ֮ ӡ ֋ , ֻ פ ...(־֮֬)...

ֳ֯ן : ֮֯ ߅

ߴ֟ ִ þָ֕ : ָ, ֮ ӳ߸ ׾ֵ , Ϭ֮ ӡ , ־ֲ פ־ ...(־֮֬)...

SHRIMATI BRINDA KARAT: Sir, we were told that the Prime Minister would make a statement on the issue of America. (Interruptions)

MR. DEPUTY CHAIRMAN: I am not committing. (Interruptions)

ߴ֟ ִ þָ֕ : ָ, ָ ׸ ָ ִ ӲӬ ־ֻ , Ϭ֮ ӡ , ־ֲ פ־ ?

ߴ֟ Ӥ ָ : ָ, ֮ פ ֈ ֯ ֟֋ ...(־֮֬)... ָ ?

ߴ֟ ִ þָ֕ : ָ, Ϭ֮ ӡ þֵ , ָ ֛ ֻ פ ...(־֮֬)...

MR. DEPUTY CHAIRMAN: The House is adjourned till 11.00 a.m. on Monday, the 7th May 2007.

---

The House then adjourned at forty-seven minutes

past five of the clock till eleven of the clock

on Monday, the 7th May 2007.

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