The better view would be that where there has been a binding decision of the Court on a question of law on a previous occasion, the point so concluded could not be litigated again either by the revenue or by the assessee. Income-tax payments are involuntary, and, according to him, the involuntary nature of payment makes it less plausible to argue that it provides personal satisfaction to the payer, unlike insurance. Vertical equity refers to taxation on the basis of ability to pay. 14.2 When explicit statutory rules do not resolve specific income-tax issues of general interest, e.g. 6.1 Equity in taxation has two concepts “vertical” and “horizontal” equity. 145 Income Tax Act, 1961). There is no way of challenging a tax law on the ground of its being unreasonable or unjust, but the application of the law must be correct. Tax law is, in general, concerned only with the legal aspects of taxation, and not with its financial, economic, or other aspects. A machinery section will not be so construed as to defeat a charge which is clearly imposed. The trouble is, that nothing in the origin test tells you when to stop running the clock backward, to decide, what prior event characterizes a later expense to which, it can be traced.
(vi) Cost: Compliance and collection costs must be minimized. This has the element of redistribution. For example – low income individuals often pay, little or no national income taxes because of the. The group re-distribution perspective insists that there is yet another way to think about taxpayers, recognizing that people not only seek pleasure or profit but also share wealth in the social and political community especially in a modern welfare state. On the other hand, expenditure on stock in trade or other circulating capital is recurrent and is accordingly a revenue item. II. The Courts have always viewed the ascertainment of income as governed by the principles recognized or followed in business and commerce, unless the legislature has itself made some specific provision affecting a particular matter or question, such as the method of accounting in certain cases as provided under section 145-A of the Income Tax Act, 1961. In The Wealth of Nations (Book V, chapter 2) he set down four general canons: Although they need to be reinterpreted from time to time, these principles retain remarkable relevance.
165, affirmed in [1946] 1 All ER. (iii) Adequacy: The system should have a nexus between the revenue proposed to be raised and the public expenditure needs.
Whether the payer should deduct or the payee should report income to record the overall net zero, the result remains important for reasons of revenue and economic efficiency, but the issue cannot be resolved within the confines of the traditional two personality approach”. When an expenditure is made, not once and for all, but with a view to bringing into existence an asset or advantage for “enduring benefit” of a trade, then, in absence of indication to the contrary, such an expenditure is properly attributable to capital and not to revenue. Tax law can be divided into substantial tax law, which is a body of the legal provisions giving rise to the charging of a tax; and procedural tax law, which consists of the rules laid down in the law as to assessment and enforcement procedure, coercive measures, administrative and judicial appeals and other similar matters. But, nearly in every department of enterprise and employment, the course of affairs and the practice of business have developed the method of estimating or computing in terms of money the result over an interval of time produced by the operations of a business, by the work of the individual, or by the use of capital. This would amount to treating unequal as equals. [4] British Tax Encyclopaedia – G.S.A. This figure of speech would be apposite in regard to money invested in an income producing form, such as, a capital sum which bears interest. 503, analyzes in depth what income tax deductions are, how they function, and how they interact with other tax items. “Corporation tax” is defined by Article 366(6) to mean any tax on income, so far as it is payable by Companies and is a tax in case of which the three conditions mentioned therein are fulfilled, namely. The professional men have to be well equipped to correctly and effectively advise taxpayers as to their potential liability to tax, and their work, though not productive to the nation, is necessary to ensure smooth working of the tax system. It then provides an overview of the principles underlying corporate income tax, focusing primarily on the taxation of cross-border income both under domestic laws and in the context of tax treaties.
Therefore, the definition of “income” becomes crucial. It is, however, a common fallacy to use similarity of facts in a previous case to decide another question of fact in the same way[1].
Stuck? These are difficult questions which take the business versus personal distinction to its limits”[10] – Professor Popkin argues that the two-personality approach fails to provide any guidance in some settings and some expenses are expressions of a “third personality” – derived from shared membership in a group and resulting in wealth redistribution within that group. In case of any discrepancy please write to lawyersgyaan@gmail.com. The most obvious instance is that of the price received or paid on the sale or purchase of a capital asset of a physical or transferable kind, provided that the thing sold or acquired is not something in which it is the business of the particular taxpayer to deal.