This had to be done as the judicial decision had been contrary to legislative intent, she added.
The budget has sought to amend the Income Tax Act retrospectively from 2005-06 to clarify that education cess and overload would not be allowed as deductions in the form of expenditure.
“Some courts are coming up with a verdict which is contrary to the intent of the legislature. We needed to come out with an explanatory amendment…There are times when you have to be retrospective just so that we are being fair. It is not to go with any other intent,” Sitharaman said at a post-budget interaction organized by industry body Ficci.
She noted that not doing it retrospectively would have become an issue for execution and would have been unfair for two sets of taxpayers.
The explanatory memorandum, provided with the Finance Bill, has explained in detail the rationale behind the move. It has referred to a Supreme Court decision that pointed out that the provisions of the Finance Act, 2004 and Finance Act, 2011 specified that education cess was an additional surcharge levied on income tax. Officials said that since the cess was effective from the 2004-05 assessment year, it had to be clarified retrospectively to clear any uncertainty.
Speaking at the session, revenue secretary Tarun Bajaj said that the industry should “accept it gracefully” and asked industry captains not to file cases in view of the court rulings. “Tomorrow, we might have a situation where income tax itself becomes an expenditure,” Bajaj said, adding that these things have a major impact on revenue collection. He also dismissed a request from the industry seeking to allow gifts and freebies to doctors as business expenditure.
The Budget had proposed that gifts and freebies shall not be treated as business expenditure under Section 37 of the Income-Tax Act.
On tapering, private investment
The finance minister said India was prepared to deal with any situation arising out of global developments, including the US Federal Reserve’s decision to roll back monetary easing, and will not allow the economy to suffer.
“Now with the RBI and the government working together and very much keenly observing what is going on in the global financial ecosystem…we have also learned the lessons of the last crisis which the government of India faced in 2012-13 and 2013- 14,” she said.
The government is watching what is happening with regard to global strategic developments, the decisions of the US Federal Reserve, and also regarding global inflationary pressures, she added.
“…We are keeping a very close watch, and I can assure the (industry) leadership here that we shall not allow the Indian economy to suffer for want of preparations,” Sitharaman said.
She also asked India Inc to take advantage of the recovery in the economy and step up investments.
“It’s time now for us as Team India to rise. We are at such a juncture where revival of the economy is very clear…this recovery is therefore going to place India as the fastest growing economy among the larger economies and that would continue even in the next tax,” the minister said.
On missing the disinvestment target, the finance minister said the government is accountable to Parliament and will take a cautionary route rather than push for a speedy conclusion.
The finance minister pointed out that some past cases have been revived by people seeking justice even after 10-15 years of an issue being settled.
“So, there is a sense of caution which I want you to appreciate among the bureaucrats also that nothing should be later found wanting. They do take their extra precaution… and I would rather go on that route than push them over to a speedy conclusion,” Sitharaman said.
She added that the government had already concluded the privatization of Air India and Neelachal Ispat Nigam Ltd and the initial public offering of Life Insurance Corporation of India would likely happen soon. “So, things are moving and the target this year is more realistic,” she said.
Energy sector reforms
Responding to suggestions made during the post-budget interaction with industry body Assocham, the finance minister noted that the government was working at multiple levels to resolve issues of the energy sector and that there was a need for more co-ordination between the states and the Center.
“The difficulties the sector faces because of legacy problems, we will first of all try to address and get that clear out of the way so that futuristic financing and possibilities of better partnership can be worked out,” she said.
On challenges faced by the aviation sector, Sitharaman noted that the global price of aviation fuel was a concern and more so for airlines.
The finance minister said that she will take up the issue of levy of Goods and Services Tax on Aviation Turbine Fuel at the next meeting of the GST Council.
“It is not with … (the Centre) alone, it has got to go to the GST Council. The next time we meet in the Council, I will put it on the table for them to discuss,” she said.