14 January 2008

My Experiences with the Income Tax Department - 4
[A single-page version of this blog can be seen here]

22 January 2003

Dr A.P.J. Kalam,
President of India,
Rashtrapati Bhavan,
New Delhi

Re: Request for investigation into harassment by income-tax officer

Your Excellency,
Like you I am a devotee of science. I have worshipped at the shrines of Newton and Maxwell. I still remember my wonderment at the age of 16 when I realized while studying for the IIT entrance examination that I had actually understood Newton's laws of motion, not merely the words of the law as before, but the reality. My hard work was rewarded by admission into the IIT Bombay. Now at the age of 40 I have attempted to pass on some of that wonderment about science to my eight-year-old son, taking him to planetariums and science exhibitions and so on.

But in recent days I am beginning to think that my interest in science has been a waste of time and that I would have been better off had I set my sights on becoming an income-tax commissioner. Perhaps I should advise my son to do the same. I should perhaps point out to him that if he becomes an income-tax commissioner he will be paid much more than most scientists in India. And that the fabulous opportunities for ill-gotten gains as an IT commissioner would put in the shade anything that he would earn as a scientist or technologist in India.

I shall briefly summarize the reasons for my distress and anger. In 1998 I began development of a search engine when the net was yet in its infancy in this country. Thanks to my foresight I was able to sell my website in 2000 for a sum of Rs 100 [normalised figure]. Out of this Rs 100 I paid Rs 50 to the software developer, Mr X. All the money received and paid was through cheques. I paid an income tax of more than Rs 17 for the year 2000-01. Now Mr Joe Sebastian, the joint income-tax commissioner handling my returns in Mumbai, whom I met on 13 January 2003, says that he is 80:20 of the opinion that the money paid to Mr X will not be allowed as an expense. He says he will consider the software to be a capital asset transferred to me before the sale at zero cost of acquisition, which means that I have to pay tax on Rs 100 whereas my income is only Rs 50. Now this seems to be a silly statement since the software was developed to my specifications and cannot be treated as a capital asset. I do not believe that Mr Sebastian's claim will stand in any court of law and I am not asking for intervention in my personal case; I intend to fight the matter up to the Supreme Court if necessary.

What I am requesting is an investigation into the assets of Mr Sebastian and his family members and into his background as an income-tax official. He is obviously a corrupt officer. His statement that he is 80:20 convinced of his current opinion is obviously a hint that the 20% can become 100% if he is suitably compensated. On January 14 I submitted a written statement to Mr Sebastian asking him for his opinion in writing.

Mr Sebastian obviously believed that since I stood to lose about Rs 17 in additional tax, I would be terrified and pay up whatever bribe he asked. In this he committed a grievous error. I have managed to survive in this corrupt country without paying a bribe so far and I have no intention of doing so in future. Three days after my last examination in IIT Mumbai (in November 1984) I landed in Baba Amte's ashram when most of my classmates were headed to the United States. I worked at the ashram for more than two years; I also accompanied Baba to Punjab at the height of terrorism. At that time I risked my life; Mr Sebastian is only threatening to take away my money and it is a risk I am prepared to bear.

If I win the case after fighting it out for two years it will be at the cost of much time, money and mental tension, all of which could have been devoted to earning more money for myself and indirectly for the exchequer. The income-tax department too will have to spend a lot of resources to fight me. The only winner in the case will be Mr Sebastian. If the IT department loses the case he loses nothing. But he stands to gain Rs 10 lakh or more (I estimate that is the order of the bribe he expects) at zero risk to himself. Officers like him are the legal equivalent of the Mumbai underworld; whenever a big business transaction takes place they believe they are entitled to a cut.

I am writing this to urge you to use your good offices to compel an investigation into Mr Joe Sebastian and other corrupt officers (I am told an honest income-tax officer is a contradiction in terms). If a toothcomb is used to go over every case that he has handled during the past five years I guarantee that you will find that the exchequer has lost crores of rupees and he has benefited to a huge extent. When I run such a huge risk by refusing to pay a bribe I believe it is only just that the government respond by thoroughly investigating him, forcing him to disgorge his ill-gotten gains, and making him pay a financial penalty that will bankrupt him as a salutary example to others.

There is only so much an honest tax-payer can do. The real action must come from the government. Failure to do that is an open encouragement to corruption.

Yours sincerely,

Philip George

Cc: Jaswant Singh, Minister of Finance and Company Affairs, Government of India, New Delhi

Cc: Secretary, Department of Revenue, Ministry of Finance and Company Affairs, Government of India, New Delhi

Cc: P. Shankar, Central Vigilance Commissioner, Satarkta Bhavan, General Pool Office Complex, INA, New Delhi 110003

More in the next

Category: Income-Tax


Philip George
Debunker of Keynesian, monetarist and Austrian economics

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