Legal reform debates and discussions
need to be substantiated by a rigorous analysis that is supported by data. And
the first step in that process is to ensure that related data and information
is available for a meaningful analysis out. I look at tax litigation at the
High Court as a case in point.
In 2003 a law was passed setting up
the National Tax Tribunal (NTT) to replace the High Courts as an appellate body
between the Income Tax Appellate Tribunals and the Supreme Court. Such
tribunalisation is not rare – a number of tribunals set up under other laws
exclude jurisdiction of other courts and allow appeals directly to the Supreme
Court against their orders. The setting up of the NTT was challenged and was
ultimately struck down by the Supreme Court as being unconstitutional – mainly
on the grounds that the composition and appointment of the bench did not give
it to the charactersitics of a court (Madras Bar Association vs Union
of India).
While there are other interesting
aspects of this judgement, in this post let us restrict ourselves to the data
related aspects. Para 12 of the judgement reads thus:
“As regards arrears of tax related
cases before High Courts is concerned, it was submitted, that the figures
indicated by the Department were incorrect. In this behalf it was asserted,
that the stance adopted at the behest of the Revenue, that there were about
80,000 cases pending in different courts, was untrue. It was the emphatic
contention of the learned counsel for the petitioners, that as of October, 2003
(when the National Tax Tribunal Ordinance, was promulgated), the arrears were
approximately 29,000. Of the total pendency, a substantial number was only
before a few High Courts, including the High Court of Bombay and the High Court
of Delhi. In the petition filed by the Madras Bar Association, it was asserted,
that in the Madras High Court, the pending appeals under Section 260A of the
Income Tax Act, were less than 2,000. It was also sought to be asserted, that
the pendency of similar appeals in most southern States was even lesser. It was
pointed out, that the pendency of such appeals in the High Court of Karnataka
and the High Court of Kerala, was even lesser than 2,000.”
On reading this portion some
questions that came to me were:
1)
How many tax related cases are pending at the
High Courts currently?
2)
What percentage is it of the pendency at the
High Courts?
3)
What proportion of the time of the High Courts
are actually taken up for tax matters
The Daksh database currently has
information relating to 10 of the 24 High Courts. Challenges in analysing data
due to High Courts’ information system hurdles have been very well analysed here and here. Within this framework I attempt to answer the
questions with the help of information available in the Rule of Law database
and compare with information already in the public domain.
1) How many tax cases are there?
The first port of call for this
information is the Ministry of Finance’s annual reports. In its report for FY
2014-15 the numbers disclosed for Customs, Excise and Service Tax (page
133) cases are 15134. Income Tax
Related cases are not disclosed in this years Annual Report but have been
included in prior years reports. The number of income tax related cases for
2014 was 31844. That’s totally around 47000 cases.
From the Daksh database the number
of tax related matters in the 10 High Courts that came up for hearing atleast
once during the last 18 months comes to about 11000. A simple extrapolation of 11000 * (24/10) gives us a 26500 cases. This extrapolation may not be appropriate as data with
respect to Bombay High Court which reportedly has the maximum number of tax
cases has not been considered. As the Daksh database coverage expands we will
be able to validate the number of 47000 cases with greater accuracy.
2) What percentage is it of the
pendency at the High Courts?
The Supreme Court newsletter Court News
puts the number of cases pending at the High Court as at March 2014 (page 7) to
be 44.80 lacs. The total number of
tax cases from the Finance Ministry’s Annual Report is around 47,000 as seen
above. That means to say that tax matters make up just around 1% of the total workload of the High
Courts!
This is also the proportion as per
data from the Daksh database and looks to be reasonable.
A state-wise comparison of the same
metric shows us that it is in the same range across the states:
Calcutta
|
1.83%
|
Delhi
|
2.30%
|
Gujarat
|
2.87%
|
Jharkhand
|
0.52%
|
Hyderabad
|
1.10%
|
Karnataka
|
0.97%
|
Kerala
|
0.65%
|
Note: Numbers above include VAT
related matters
3)
What proportion of the time of the High Courts
are actually taken up for tax matters
We really do not have enough
information in the public domain currently to answer this question. In fact
this metric is not available for the other types of cases – civil, criminal,
writ petitions, etc. A detailed time
& motion study is required to be carried out for us to begin to understand
how our judiciary functions.
Summary
As we have seen above tax related
cases are not substantial in number at the High Court level. How was this area
of litigation chosen for ‘reform’ ahead of other areas? Even granted that the
number of cases alone do not drive prioritisation and that the value of tax
under dispute should be considered, such a number should not be viewed in
isolation. It needs to be compared with amount under litigation and social
impact of cases piling up in other areas.
The capacity of the State to
dispense justice is a limited resource. Any attempt to re-distributing this
scarce resource should require a complete cost-benefit analysis for the society.