CBDT retains its powers in DTC Bill

The powers of the Central Board of Direct Taxes (CBDT) have been reinstated in the Direct Taxes Code (DTC) Bill. The first draft of DTC had proposed to strip the board of its powers to issue certain communications and restricted its role to merely a tax-collection agency. The Bill, tabled in Parliament on Monday, has restored the powers given to the board under the existing Income Tax Act.

The Bill has dispensed with the provisions relating to publication of all internal orders, instructions, directions and circulars issued by CBDT in a tax bulletin or on the intranet of the I-T department. Another controversial proposal in the draft, to give powers to the Central government to issue directions to CBDT, has also been dropped after it created a furore in the finance ministry.

The revised Bill said the orders, instructions, directions and circulars issued by the board would be binding on all other income-tax authorities and other persons employed in the execution of DTC. The draft code, on the other hand, had said CBDT, in exercise of its powers or performance of its functions, should be bound by directions given by the Centre in writing on questions of policy. It also said the Centre would have the final say on whether the question is of policy or not.

A finance ministry official explained that currently CBDT was performing a dual function of administrating tax collections as well as deciding on policy matters, but in the draft DTC the attempt was to make it a tax-collection agency of the government, outside the revenue department. Hence, it was felt that the power to issue directions should be circumscribed and be invoked only in rare cases.

Before the Bill was taken to the Cabinet, it was decided by Finance Minister Pranab Mukherjee that the board should continue with its existing identity, sources said. The decision was necessitated as many revenue service officials had conveyed their discomfort to Mukherjee.

At present, CBDT is a statutory authority created under the Central Board of Revenue Act, 1963, and defined under Section 116 of the I-T Act. Powers of the board have been defined in Chapter 12 of the DTC Bill. Clause 129 of the Bill empowers the board to issue general or special orders.