The Income-Tax Bill 1997 has greatly belied the expectations that the country had from the expert group appointed for carrying out the changes. This is basically due to the fact that the group took upon itself more work than that it could handle within the limited period of 11 months. And instead of making changes, it undertook the onerous task of drafting a new tax code which apparently could not have been accomplished in a befitting manner within the specified period.

This brings out the glaring contrast between the group's functioning and the Law Commission's working, which with full-time members and adequate secretarial assistance, took two years to give a draft of the bill, which was later enacted as the Income -Tax Act 1961. The Income-Tax Act 1961 successfully came out of legislative anvil and the I-T Act 1961 was brought into force with effect from April 1, 1962. Thus it took nearly six-years to enact the existing I-T Act which is proposed to be replaced by the I-T Act 1998 drafted by a group with faced much more challenges. This indicates the hurried manner in which an imperfect new act is proposed to be clamped on the country which is on the threshold of 21st century.

The group has been frank enough to accept the constraints under which it had to function, paragraphs 17 and 18 of the group's report read as under:"The group was considerably handicapped by two factors. One, paucity of basic data which are required for analyzing the impact in several respects and that of various alternatives. No reliable information, even relating to the allowances claimed by large companies or by taxpayers according to their income range, the tax effect of various incentive provision, like relief for savings in specified assets, the impact of depreciation rates or cause-wise analysis of appeals.

The Chelliah Committee had noted the difficulties faced in analysing the impact of alternative tax regimes because of lack of adequate data. But little progress has been made towards improving the same. The other constraint has been the administration's weakness. At several points, the group had to compromise on some canons of taxations on administrative considerations based on feedback from the field and the experience of senior officers in matters of implementation. The group's report might have been different in some of the crucial areas had the administration been in a position to handle the volume of work with greater speed and efficiency. A more rational system of income taxation will have to await a quantum leap in adminsitrative organisation and installation of a modern information system in the tax departments."

If the group's report would have been "different in some of the crucial areas.." then why not wait for better administrative inputs to ensure that `crucial' areas too are taken care of adequately instead of rushing through a hurriedly conceived tax legislation in the form of a new tax code.

In chapter I (preamble) the group said tax laws cannot be simplified beyond a point. For there can be a conflict between simplicity and precision. Simplicity sometimes results in ambiguity, providing scope for varying interpretation. Keeping this in mind, the group did not make any radical departure from the basic framework of the income tax law unless it felt desirable in the interest of facility of understanding or administrative ease. Many of the existing sections have been retained with only minor modifications. The reason is that where the law is well settled and in consonance with the established principles of taxation, no change is called for. Any substantial change in the language of the law or judicially noted or interpreted phraseology, it was thought, might give rise to a fresh spurt of needless litigation. For similar reasons, the mode of total income computation followed in India has been retained, viz, on a global basis but computed under a few specified heads, such as, salaries, income from house property, profits and gains of business or profession etc.

In the above background, it is necessary to repeal the existing act and enact a new tax code when it is going to be substantially on the same lines as the existing act. A full-time body headed by a supreme court judge should be set up to examine the need and feasibility of a new tax code, then an exercise on the basis of empirical studies can be carried out to draft the new tax code instead of adhoc approaches preferred in the I-T Bill 1997.

The author is former chairman of Central Board of Direct Taxes