Friday, April 12, 2013

The Taxation Conundrum

(This skit was written by me in 2009 when Pranab had just taken charge as Finance Minister from P Chidambaram who had moved to the Ministry of Home Affairs)

The other day my friend was telling me about a dream he saw in the previous night. In the dream the God appeared and asked him to seek any boon as per his wishes. My friend being an ex-banker made some quick calculations. He thought if he could get Re1 crore as boon, he would invest it wisely and live in peace for the rest of his life out of the returns. So he asked the God to grant him Re1 crore as boon. The God immediately handed over to him a bagful of currency notes. My friend, being a true banker, did not want to take the God for granted as regards the quantum of money. He started counting the pieces of currency. To his surprise, he found only Rs55 lakh in the bag! He looked at the God with a question mark on his face. The God simply smiled at him and asked him to see the other documents in the bag. My friend found a working sheet showing the following details:

Ø  The amount of boon: Rs1,00,00,000. 00
Ø  Less Service Tax:      Rs    12,00,000.00
Ø  Less IT at Source:     Rs    33,00,000.00
Ø  Net amount in cash:   Rs   55,00,000.00

He also found two certificates signed by the God for having deducted the tax at source and remitted to the exchequer.

My friend was not amused at all. He protested to the God strongly. Here is their conversation:

Friend: This is too much. I had heard of God-fearing men; but never heard about tax-fearing God! I am cheated! Had I known about this I would have asked for more.

God: That was your fault. I am simply helpless. I have to be tax-compliant. You Know PC. He has brought everything under the tax net. The income tax is all-pervasive! Nobody can escape from it.

Friend: I had heard of all-pervasive (omnipresent) God.  You are talking of a new concept! By the by, what is PC?

God: Oh my God! This is too much. You are an ex-banker and you don’t know PC? I was referring to P. Chidambaram, the Finance Minister, Baba!

Friend: Oh my God! You have to update your website! He is the home minister now. The good-old Pranab is the present Finance Minister.

God: You are updating me, the God himself! But I know for sure PC continues to be the man who runs the Government finances.

Friend: How is service tax made applicable to boons? By the by, you have calculated it at 12 percent. You must know Pranab has brought it down to 10 percent. You refund Rs2 lakh to me right now!

God: Don’t exhibit your Bank Manager-brain to me! The change in rate will come into effect only after the amendment is gazetted. As regards the applicability of service tax to boons, please be aware that PC has seen to it that anything one does for others is treated as a service and attracts tax! I don’t want a taxman to come to me tomorrow and tell me that I have defaulted! You know the recent case of a Kannada actress!

Friend: I don’t read filmy stuff! But if it pertains to tax matter, you may please enlighten me!

God: The case is interesting. This small-time actress had acted in a few Kannada films about a few years back. She mostly played the role of the sister of the hero. You know the Kannada film producers. With the limited market they can offer only a few lakhs to the hero and the heroine. The hero’s sister is placed in the third slot and at the best can expect Rs2-4 lacs depending on the length of the role.

Friend: I understand. The tax officials will not even bother to look at the assessment of such artists. Forget about raiding their residences!

God: But that is exactly what happened! This actress’s house was raided by the tax officials!

Friend: I pity the officials! They must have returned empty handed after sipping a cup of coffee offered by the artist!

God: You are absolutely wrong! The tax officials laid their hands on a bonanza and seized cash and other valuables amounting to crores of rupees!

Friend: Oh my God! What happened then? Did they confiscate the entire bonanza?

God: No! You are wrong again! The actress convinced them that she had an annual income of Rs9 crore. The Department assessed the income and collected tax and penalty amounting to about Rs3.5 crore. The raiding party was rewarded by the Department for their efforts in unearthing the undeclared income.

Friend: That is understandable. But don’t you find something fishy? How can a Kannada actress convince the tax authority that she had a genuine income of Rs9 crore?

God: That is what even I have not understood! But I will give credit to the tax consultant who represented the artist! Full marks to him!

At this stage my friend was rudely woken up by his wife telling him that it was already 7 AM in the morning! He cursed his wife; but realised that he had only witnessed a dream!
A V Krishnamurthy
6th March, 2009

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