I had the wonderful opportunity to study Taxation Management under Prof. Ram Kesh Gupta. I learnt the following from him:
1. Tax compliance is good for a firm from all perspectives. It is ethically right and it keeps the organization out of litigation which means it can focus on maximizing profits.
2. Tax evasion is not only illegal but also detrimental to business in the long run.
3. The objective of the firm is to make profits – not evade tax.
4. Paying taxes is ethical and is a way to pay back the system/country/government for the infrastructure made available for the business to function (physical infrastructure, conducive business environment etc.)
5. Tax avoidance unlike tax evasion is not illegal and should be used for the benefit of the firm.
6. Tax planning is a necessary scenario for all firms these days because of intense competition.
7. Tax planning and management will not only help you survive but may also prove to be a competitive advantage.
The following are important points about filing returns:
1. Always file your income tax returns on time to avoid penalty and also scrutiny.
2. Once the returns are filed beyond the due date – penalty can be as high as 300% (in India) and it will go for compulsory scrutiny. This can be avoided by filing returns on time.
3. Unabsorbed depreciation can be carried forward for 8 years.
4. Unabsorbed business losses can be carried forward indefinitely.
5. If returns are not filed on time any unabsorbed depreciation or losses cannot be carried forward again to the next year.
These points are about litigation:
1. If the IT officer is disallowing any expense and there is a dispute, go for litigation and get an opinion from the higher authority.
2. The higher authorities are:
- Commissioner of Income Tax (Appeals)
- Income Tax Appellate Tribunal (ITAT)
- High Court (HC)
- Supreme Court (SC)
3. Never pay a bribe, because your case can be pulled up at any time again in the future.
4. In case of doubt in interpretation, go for litigation as it will settle the case once for all. If the judgement is not in your favour appeal to the higher authority.
5. Paying a bribe is like getting stuck in a whirlpool. It might be very difficult to get out of the cycle.
The bottom line is:
Never evade tax, always file your return on time and make use of all legal provisions available to lessen your tax burden.
The article is very concise and crisp in its meaning. Tells the reader the importance of tax management – “Never evade tax, always file your return on time and make use of all legal provisions available to lessen your tax burden.”