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The Jurisprudence of Taxpayer Rights in India: An Evolutionary Tale in Direct Taxation

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This article traces the evolution of taxpayer rights in direct taxes in India. From the first income tax statute introduced in British India to the most recent one, a broad analysis has been done of the enactments to comprehend the jurisprudence of taxpayer rights in India. The role of different administrative committees and the courts of law in establishing taxpayer rights has also been analysed. The scope of taxpayer rights in post-independence India has been probed, the colonial and post-colonial travails of the taxpayer have been outlined, and the contemporary redressals to taxpayer concerns up to the period of September 2019 have been examined in this article.

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  1. ‘V G Siddhartha was the founder of India’s largest coffee-shop chain, Coffee Day Enterprises, a $572 million-in-sales business (with more than 10,000 employees) that persuaded a country raised on tea to consume something else entirely. It made him a wealthy man, one of the richest in India and, for a brief moment after Coffee Day’s 2015 IPO, a billionaire.’ Brown (2019: para 3).

  2. Johnson (2019).

  3. Choudhary (2019: para 2).

  4. The Central Board of Direct Taxes (CBDT) is a statutory authority functioning under the Central Board of Revenue Act, 1963. The officials of the Board in their ex-officio capacity also function as a Division of the Ministry dealing with matters relating to levy and collection of direct taxes.

  5. Choudhary (2019: para 2).

  6. “Tax terrorism” is the Indian term for harassment by revenue officials. Dhume (2019).

  7. Bentley (2016: 192).

  8. Foucault ‘referred to his method of study as description, arguing that the role of philosophy is not to reveal what is hidden, but rather to make us see what is seen.’ Orford (2012: 609).

  9. Singh (2019: 2).

  10. Indra Sawhney case (1992: para 479).

  11. Singh (2019: 10).

  12. Ibid.

  13. Smith (1999:145).

  14. James Wilson was India’s first finance minister and founder of The Economist. By 1859, Wilson -a former hatter from Hawick, Scotland; financier; and magazine editor (The Economist) was a leading member of the Liberal Government; on the cusp of becoming Chancellor of the Exchequer. Bagehot (1968: 352–353).

  15. ‘The East India Company was formed in London on the last day of 1600 by a group of merchants, mariners, explorers and politicians. Its mandate was to finance trading voyages to India, Southeast Asia and China with subscribed Capital.’ Roy (2015: 6).

  16. Hibbert (1978).

  17. ‘Thomas Babington Macaulay, the English historian, essayist and politician, called the East India Company ‘the greatest corporation in the world’. Today we would use those words. We might call it the world’s most powerful corporation, which it was during its 275 year life that extended from the mercantilist period of chartered monopolies to the industrial age of modern corporations.” Das quoted in Roy (2015: xxiv–xxv).

  18. Jenkins (2012: 89).

  19. Ibid.

  20. Letter to a friend (July 4, 1860) The name of the recipient is not disclosed: letters copied to Bagehot are described in all published sources only as letters to friends. Quoted in Jenkins (2012: 91).

  21. Income was taxed in four broad schedules or heads. The schedules cast a wide net, and were based on what we now know as the residence and source principles. Ibid.

  22. Pagar (YEAR: 21–22) citing Report on the Income Tax in the N W Provinces (1861–1862); Niyogi (Year: 36–37).

  23. Rao (1931: 11, fn.127).

  24. While the Income tax was payable by all persons having income more than 20 lb, Licence Tax would be payable by all. This would cover all the classes whose income was difficult to be assessed or those subjects who paid little towards the revenue of India in other respects. Moore (1966).

  25. Income Tax Act of 1886.

  26. Ibid.

  27. IT Report (2018: para 1.4).

  28. Alvaredo et al. (2017: para 1.3).

  29. Ibid.

  30. IT Report (2018: para 1.6).

  31. Income Tax Act (1961), Section 5.

  32. IT Report (2018: 1.7).

  33. Jenkins (2012: 14).

  34. ITA (1860 s.64).

  35. ITA (1860 s.55, s.56 cl.4).

  36. Ibid.

  37. ITA (1860 s.60, s.53).

  38. ITA (1860 ss.177–178, 216).

  39. The purdah system was in place in Hindu and Muslim communities both.

  40. ITA (1860), sec. 197.

  41. Ibid.

  42. Punjab Laws Act 1872.

  43. Income Tax Act of (1886).

  44. Ibid.

  45. Income Tax Act of (1918).

  46. Ibid.

  47. Ibid.

  48. Indian Income Tax (Amendment) of (1939).

  49. Income Tax Act of (1918).

  50. Income Tax Act of (1922).

  51. Indian Income Tax (Amendment) Act of (1926).

  52. Sections 256 and 257 of the Income Tax Act of (1961).

  53. Law Commission of India (1958: 1).

  54. India gained independence on 15th August, 1947 and ceased to exist as a British colony.

  55. While the work of most of the committees is significant, the focus here is on some noteworthy contributions towards the evolution and protection of taxpayer rights.

  56. IT Report (2018: 3).

  57. ibid.

  58. Law Commission of India (1958: para 2).

  59. Direct Taxes Administration Enquiry Committee Report (1960: para 8).

  60. Chikermane (2018: para 1).

  61. Introduction, Final Report, 1971, Direct Taxes Enquiry Committee (1970).

  62. Gulati (1972: 1314–1317).

  63. India signed its first bilateral tax treaty with Greece in 1965, followed by one with Egypt in 1969. 17 more bilateral agreements were concluded in the 1980 s with countries like Japan, Mauritius, USA and Brazil, among others. In the 1990 s, this process gained momentum and 39 treaties were signed, notably with France, the United Kingdom, Singapore, Switzerland, China and Russia. Jaiswal and Biyani (2016: 10).

  64. Rao (2016: para 2).

  65. Ibid.

  66. Ibid.

  67. Taxpayers are allowed to mitigate their tax liability so long as it is within the four corners of law. This principle was laid in Inland Revenue Commissioners v. Duke of Westminster (1936: 490). Though in a later judgment of Ramsay Ltd. v. Inland Revenue Commissioners (1982: para) the use of colorable devices for tax planning was completely shunned.

  68. “Treaty shopping” connotes a premeditated effort to take advantage of the international tax treaty network and a careful selection of the most favorable tax treaty for a specific purpose. Rosenbloom (1983: 766).

  69. Duhigg and Kocieniewski (2012: 2).

  70. Deloitte (2018: para 1).

  71. Zuchermann (2015: 36).

  72. Vodafone v. Union of India (2012: 573).

  73. Sections 2(14), 2(47), 9 and 195 of the Indian Income Tax Act 1961 were amended by the Finance Act of 2012. Govt. of India.

  74. For detailed history of retrospectivity, see, Salve (2015: 1–28).

  75. Singh and Nagpal (2014: 5).

  76. Krishnamurthy (2013: para 2).

  77. Ibid.

  78. GAAR was finally made effective from 1st of April, 2017 in India.

  79. GAAR Report (2012: 36).

  80. Krishnamurthy (2013: para 1).

  81. TARC recommendations (2014: 2–3).

  82. Ibid.

  83. Ibid.

  84. Ibid.

  85. Ibid.

  86. Ibid.

  87. Ibid.

  88. OECD (2013: para 1).

  89. An earlier attempt was made by the UPA Government to bring a new legislation in 2010 when a taskforce had submitted a draft Direct Tax Code. However, this could not be taken further due to differences within and outside the Government. Business Line (2019: para 2).

  90. Ibid.

  91. A good tax system is generally perceived as comprising of the four canons of taxation of Adam Smith, namely, canons of equality, certainty, convenience and economy. These canons were propounded in his much-acclaimed work ‘An Inquiry into the Nature and Causes of the Wealth of Nations, published in 1776. Smith (1999: 416).

  92. Article 265 in The Constitution of India 1949 states ‘Taxes not to be imposed save by authority of law No tax shall be levied or collected except by authority of law’ (1950: Art. 265).

  93. American and French Revolutions primarily.

  94. The legislative powers are divided within three lists, namely, Union, State and Concurrent, within the premise of this Article.

  95. BMR Advisors (2013: 34).

  96. Ibid. 35.

  97. Lohia Machines v. UOI (1985: 308).

  98. KrishnaMurthi and Co v. State of Madras (1972: 2455).

  99. BMR Advisors (2013: 50).

  100. ‘The State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India.’ Constitution of India (1950: Art. 14).

  101. Article 301–304 provide the scope of taxation on movement of Goods and Services across the territory of India. Reasonable restrictions, through entry taxes, on public policy grounds were held as valid impositions. A Constitution Bench of 9 judges in Jindal Stainless Ltd. v. State of Haryana ruled this by a 7:2 opinion. The bench further stated that the factum as to whether an entry tax is discriminatory or not has to be examined by the respective benches hearing the same. Constitution of India (1950: Art. 301–304).

  102. Jindal Stainless v. State of Haryana (2016: 461).

  103. Cape Brandy Syndicate v. IRC (1921:71).

  104. Vodafone v. Union of India (2012: 573).

  105. Saran v. Commissioner of Sales Tax (1985: 985).

  106. Varghese V. ITO (1981: 597).

  107. Collector of Central Excise vs Parle Exports (1989: 644).

  108. Commissioner of Customs (Import), Mumbai v. Dilip (2009: 40).

  109. Some jurisdictions have the Taxpayer Bill of Rights in place instead of a Charter, for example USA and Canada. Also, the Tax Code of Chile has a legislated list of taxpayer rights. Govt. of Australia (2017: Chap. 2).

  110. The concept was first articulated and implemented in the United Kingdom by the Conservative Government of John Major in 1991 as a national programme with a simple aim: to continuously improve the quality of public services for the people of the country so that these services respond to the needs and wishes of the users. The programme was re-launched in 1998 by the Labour Government of Tony Blair which rechristened it “Services First”. India followed suit by introducing Citizen Charter in most of the public departments in 1998. Govt. of India (2017: para 4 ff).

  111. de Zeeuw (2008: 40).

  112. Govt. of Australia (2017: Chap. 2).

  113. Jain and Sekar (2015: 445).

  114. Section 246-A, 253(2), 260-A(2), 263 and 264 of the Income Tax Act of (1961).

  115. Deloitte (2019: 9).

  116. Final Report, 1971, Direct Taxes Enquiry Committee, 1970.

  117. Section 245 B of Income-tax Act, 1961 (Chapter XIX-A).

  118. A proviso to Section 245 H of the Income Tax Act 1961 was inserted in June 2007. This amendment limited the extent of immunity only to provisions of Income Tax Act 1971 and Wealth Tax Act 1957, for all applications filed before the Settlement commission after 1st June 2007.

  119. Only a writ petition can be filed if principles of natural justice have been violated and mandatory procedural requirements of law were not complied with.

  120. Govt. of India (2016: Para 1).

  121. Savla and Sharma (2017: para 3).

  122. Section 245D(4A) of the Income Tax Act 1961.

  123. Govt. of India (2015: chap 8).

  124. Deloitte (2019: para.1).

  125. Columbia Sportswear Co. v. DIT (2012: 224).

  126. Section 245(R)(6) of Income Tax Act (1961).

  127. Deloitte (2019: 9).

  128. Dhruva Advisors (2018: 3).

  129. Ibid.

  130. Section 92CC and 92CD, Income Tax Act 1961.

  131. Black's Law (2009).

  132. Dhruva Advisors (2018: para 4).

  133. Section 144C of Income Tax Act 1961, inserted by Finance Act of 2009.

  134. MAP is an alternative available to taxpayers for resolving disputes giving rise to double taxation whether juridical or economic in nature. The agreement for avoidance of double taxation between the countries would give authorization for assistance of Competent Authorities in the respective jurisdiction under MAP. In the context of OECD Model Convention for the Avoidance of Double Taxation, Article 25 provide for assistance of Competent Authorities under MAP. Vaidya and Rao (2011: para).

  135. Sections 2(14), 2(47), 9 and 195 of the Indian Income Tax Act (1961) were amended by the Finance Act of 2012. Govt. of India (2012a, b, c).

  136. Mohan (2012: para 2).

  137. Mohan (2013: para 3).

  138. Srivats (2017: para 5).

  139. Cairn Energy ready to reinvest in India if retro tax issue is resolved. PTI (2019b: para 1).

  140. Cairn India tax case: Retrospective tax arbitration award delayed till 2019-end. PTI (2019a: para 2).

  141. Recently, the Delhi High Court in the case of Union of India v. Khaitan Holdings (Mauritius) Limited & Ors. refused to grant anti-arbitration injunction (i.e. stay on arbitration proceedings) to Union of India in a dispute under India-Mauritius Bilateral Investment Treaty. It held that interference by domestic courts in arbitral proceedings under BIT is permissible only in “compelling circumstances” in “rare cases”. The Court reaffirmed that issues as to the jurisdiction of the arbitral tribunal should be decided by the arbitral tribunal itself. Modani et al. (2019: para 1).

  142. Ranjan and Anand (2018: para 1).

  143. ‘CBDT initiates probe into Cafe Coffee Day founder V G Siddhartha's death.’ Choudhary (2019: para.3).

  144. ‘Faceless e-assessment scheme for taxpayers launched’. ET Bureau (2019: para.2).

  145. Relief for markets as super-rich surcharge on FPIs is withdrawn. Sultana (2019: para.).

  146. Ernst and Young (2019: 1–2).

  147. OECD (2013).

  148. Deloitte (2019: 9).

  149. Govt. of India (2019: para 1).

  150. Kanga and Palkhivala (2004: ix).



  • Cape Brandy Syndicate v. IRC. 1921. KB 64.

  • Heydon’s Case. (1584) 3 Co Rep 7a.

  • Collector Of Central Excise vs Parle Exports. 1989. AIR [SC] 644.

  • Columbia Sportswear Co. v. DIT. 2012. 11 SCC 224.

  • Commissioner of Customs (Import), Mumbai v. Dilip Kumar and Company. 2018. 9 SCC 40.

  • Eilbeck (Inspector of Taxes) v. Rawling. 1982. A.C. 300.

  • Govind Saran Ganga Saran vs Commissioner Of Sales Tax. 1985. AIR 1041, 1985 SCR (3) 985.

  • Lohia Machines Ltd and Anr v UOI. 1985. 152 ITR 308.

  • Jindal Stainless Ltd v. State of Haryana. 2016. Indlaw SC 979.

  • K. P. Varghese V. ITO. 1981. 131 ITR 597.

  • Krishna Murthi and Co v State of Madras. 1972. AIR 1972 SC 2455.

  • Vodafone International Holdings B.V. v. Union of India. 2012. 1 S.C.R. 573.

  • W. T. Ramsay Ltd. v. Inland Revenue Commissioners. [1982] A.C. 300.


  • Code of Civil Procedure, 1908.

  • Constitution of India, 1950.

  • Income Tax (Amendment) Act, 1926.

  • Income Tax (Amendment) Act, 1939.

  • Income Tax Act, 1860.

  • Income Tax Act, 1886.

  • Income Tax Act, 1918.

  • Income Tax Act, 1922.

  • Income Tax Act, 1961.

  • Indian Evidence Act, 1872.

  • Punjab Laws Act, 1872.

  • Right to Information Act, 2005.

  • Wealth Tax Act, 1957.


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I am thankful to International Bureau of Fiscal Documentation, Amsterdam for the research stay during the summer of 2017. It provided me with valuable insights which have been helpful in the development of this paper. I thank Luca Cerioni for his generous guidance. I also thank Prabhakar Singh and Arpita Gupta for the sustained conversations and thoughtful comments.

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Jha, K. The Jurisprudence of Taxpayer Rights in India: An Evolutionary Tale in Direct Taxation. Liverpool Law Rev 40, 271–297 (2019).

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