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Raj Kumar Makkad (Adv P & H High Court Chandigarh)     02 March 2010

Should we abolish courts and institutes of law and commerce?

Should we abolish courts and institutes of law and commerce?

Yes, if we go by the trends of revenue officers as well as amendments in tax laws.

Should we agree to what the tax officer want and ignore the law? Yes. By CA Dev Kumar Kothari, Grad.CWA, ACS, ACA.   Kolkata  



 In view of the proposals in the Finance Bill 2010 regarding service tax on commercial rent, it can be said that there is no need to learn law and monitoring of law by courts. Because courts judgments can be nullified any time.


The real question:

The title of the article is kept in a question form, and this question is real problem our public is facing and the problem may become intense, if the trend is allowed to continue.


Education of law:

Various institutions like law institutes, ICAI, ICWAI, ICSI, provide wholesome education and training about laws in their courses. In course of graduation in commerce, engineering courses, medical courses, management courses some basic education about law is provided. For example, the author had some preliminary studies during his class IX to XII in the subject ‘commercial practices’. In three years degree course of B.Com there was sufficient studies of law  which provides insight into the basic fundamentals of a good law and its enforcement. According to such fundamental studies most important learning is that law is to be read as it stands at any point of time, no words can be added or omitted except in rare cases. The law must be within authority of the law makers. During   three all India courses of ICWAI, ICSI and ICAI also wholesome studies of law were made and basics of good law were reinforced.


Everyone is assumed to know law biggest dillemma:

The biggest dilemma is that every person is assumed to know the law. And excuse of not knowing legal position is generally not considered a good and sufficient excuse as cause for non compliance of law.


Retrospective amendment in tax laws:

The government has as a routine adopted mechanism to amend tax laws with retrospective effect. Such amendment are generally because of inactions and inefficiencies of revenue officers in compliance of legal procedure and taking timely actions. Every year there is whole some amendments in tax laws through regular budget (Finance Act) and several other amendments are made from time to time, yet amendments with retrospective effect are taking place as a general routine to nullify the legal opinions of courts, judgment and orders of courts and opinions of legal professionals.


The provision under study:

In this study we are concerned with provisions relating to service tax on commercial rent. To cut short the issue and directly coming to the point it is suffice to say that when the tax on renting was proposed in the Finance Bill 2007, an article written by the author was published in the Service Tax Today (A Taxmann) publication) in  MARCH 22,2007  PAGE 55 (Mag.).  a renowned publication of Taxmann. The publication of article was  during discussion and suggestions phase and much before the Finance Bill 2007 was enacted.
Suggestions by the author on proposed charging section in the Budget 2007:
When the budget 2007 was announced, the author had written above article and request was made  to reconsider levy and some suggestions- make tenant, as service receiver liable to register and pay service tax".
 In the article author had  made detailed observations on the budget proposals about service tax on  commercial premises and expressed that only some of  services in relation to renting  can be brought in tax net as per proposed section. The author had also made suggestions for consideration of the Finance Minister, with highlight of the relevant suggestion in this context, as follows:
Request and suggestions to the Finance Minister:
It is requested and suggested to the honorable Finance Minister to:
Reconsider the proposal in view of constitutional validity and if found inconsistent with constitutional provisions and also inconsistent with the concept of service tax please drop the same.
If found correct and desirable, to impose tax only on portions of buildings which are used for commercial purposes.
To make the service receiver liable to pay service tax on service used. This will avoid revenue leakage. For example, suppose a building is owned by four persons who let out the same to a company each receiving rent of Rs.60000/- per month amounting to Rs.7,20,000/- per year. In this case all owners may be exempt from service tax. Whereas the tenant, if made liable to pay service tax , will have to pay tax on entire amount of Rs.28,80,000/- paid to four owners.
In case of business organizations several properties are taken on rent from several owners. It would be difficult to monitor owners, instead of that tenants who are organized persons can manage tax affairs easily and it would be easy to monitor them.
To avoid confusion  words "by renting " can be used in meaning of taxable service as follows: "taxable service" means any service provided or to be provided -- to any person, by any other person by renting of immovable   property for use in the course or furtherance of business or commerce".
This is because the words 'in relation to renting' can be construed as service rendered to land lord or tenant in relation to renting of property and not the rent itself.
Therefore, as per clause (e) of the above suggestions it is clear that the author had in clear terms indicated in his article that the scope of taxable services, as per proposed charging section can be construed to be restricted to services provided by any person to other person (likely to be land lords and tenants) only in relation to renting of properties and not renting of property itself. The author had also suggested proper language to be used in charging section. However, as usual our bureaucrats being overconfident had not taken care of such an important suggestion at right time. If all the suggestions put forth by author were incorporated in the law, the revenue could have gained substantially and without doubt.


 8 Replies

Daksh (Student)     02 March 2010

Dear Mr.Makkad,

The title of your compilation does not go in sinc. Let 't be changed to


The summary part usually comes in the last part - last but not least the compilation is totallly vague and unimpressionable.

Best Regards


Arup Kumar Gupta, Korba, Chattishgarh ((m)9893058429)     02 March 2010

Thanks again Mr makkad.  TO avoid 'junglecracy" civilized society introduced - Courts; trade & commerce; democracy etc,etc...

but now a days it dominating the common people and the mass in so high altitude that any person may feel that the 'junglecracy' where - might is right, - is better than this so called civilization.


Anil Agrawal (Retired)     02 March 2010

Shah Bano case.

If Constitution can be amended, ordinary Acts do not count for much. Tax on breathing on the anvil.

N.K.Assumi (Advocate)     08 March 2010

Take away the law and the Courts: Where is the possession and ownership of the citizen. Laws are there with the Courts speaking through the law  mismanaged the systems that creates the real problems in the society.

Raj Kumar Makkad (Adv P & H High Court Chandigarh)     08 March 2010

I pay thank to all who contributed in this healthy discussion this way or that way.

Arup Kumar Gupta, Korba, Chattishgarh ((m)9893058429)     14 March 2010

my thinking also in line with mr assumi.


You seemed to have forgotton to mention Shiv Sena Cracy , Ram Sene Cracy, VHP Cracy, Togadiya Cracy right in our midst.

Jamai Of Law (propra)     23 February 2012

'in relation to' ................ is the bone of contention.




What's the better word then? ....................... Should it be 'of and in relation to'  





renting the movable property is is also having many 'unacknowledged services' which aren't under the service tax net.



at least a million of people may be renting their indicas/taveras in India .... there are middle agents who work as agent/commission suckers in between .... hug4e monthly turnover. 



same is the case in renting of immovable property renting. there are many layers of middle agents who aren't under the service tax net.




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