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ACC appeals to Supreme Court on JPLP tax evasion case

The Supreme Court (SC) has reportedly accepted the Anti-Corruption Commission’s appeal against JPLP tax evasion judgment rendered by the larger bench of the High Court.

Sources from the SC said that the appeal case is yet to be assigned to one of the benches for hearings.

ACC appealed to the SC earlier this month after the state prosecutor, Office of the Attorney General (OAG), decided not to appeal against the ruling of the larger bench, which overturned the judgment of High Court’s bench III.

After reviewing the judgment passed on August 15, ACC informed the state prosecutor on the need to appeal before the SC. The last date for appeal was on August 29.

“Upon follow-up by the ACC, it was informed albeit verbally that the Attorney General is not appealing the case although screening corpuses had unanimously consented to appeal,” the commission stated in the appeal letter to the Chief Justice. “The ACC strongly believes that the ruling of the larger bench and OAG not appealing the case will set grave and erroneous precedence.”

ACC’s appeal letter stated that there is a huge stake both to the state and the taxation regime of the country if the matter is to be closed with the judgment of the larger bench, High Court (HC). ACC officials said that the judgment rendered by the trial court and the larger bench was almost same.

The commission requested the SC to permit ACC to appeal the case on behalf of the State. “Since OAG is yet to intimate ACC in writing the ground for not appealing to the SC, the commission is not in a position to submit the details for now.”

The commission, however, assures that the submission for appeal will be made within two weeks.

The larger bench presided over by three justices upheld the Phuentsholing drungkhag court’s ruling passed in July 2017. Both courts ruled that Jatan Lal Prasad, the owner of Jatan Prasad Lal Prasad (JPLP) enterprise in Phuentsholing, is liable to pay Nu 14.487 million  (M) for evading tax amounting to Nu 184M in four years from 2011 to 2014. The figure was worked out after calculating the 24 percent penal interest and 200 percent fines.

Both the larger bench and lower court considered purchase cost deductions of Nu 118.651M for the income of four years.

The bench III of HC, however, had altered the lower court’s judgment and increased JPLP’s tax liability from Nu 14.487M to Nu 126.897M by including purchase cost after the OAG appealed against the lower court ruling.

The bench III on January 30 this year ruled that the purchase/direct cost deduction is allowed only during normal course of filing the tax returns given in the Income Tax Act of Bhutan  (ITA) 2001. The ruling also stated that once the tax evasion is established, deductions are disallowed under general provision of the ITA.

Aggrieved by the bench III ruling, which had erred in interpreting section 35.2 of chapter 5 of the general provisions of the ITA by considering purchase as non-deductable and sentencing JPLP to an imprisonment of five years, legal counsel appealed to the larger bench on February 4 seeking the interpretation of taxation law.

The larger bench stated that taxpayers are mandated to pay just, fair, and equitable taxes as determined by the specific tax laws, whether it is direct or indirect tax. Such taxes are levied on the basis of net profit earned from the operation of a business.

The ruling also stated that for the purpose of earning profit or income, there has to be an investment. “If there was any tax evasion like in the current case, tax evasion can be possible only after the operation of a business.”

“In case of evasion, the enforcement is to impose fines and penalties. The basic essence of Income Tax Law is that the taxable income is the net profit of a business and not the total sales amount or turn over,” the ruling stated.

The larger bench also directed Jatan Lal Prasad to pay additional fine amounting to Nu 213,500 as per ITA and Anti-Corruption Act in lieu of five years imprisonment after deducting 92 days the appellant spent under custody.

The bench III after altering the decision of the lower court had sentenced Jatan Lal Prasad to five years in prison (non-compoundable). The lower court, in addition to the fine and penalties provided under ITA, imposed an additional penalty of Nu 7.875M on appellant as fine in lieu of imprisonment.

Jatan Lal Prasad was released on bail amount of Nu 80M by OAG on September 16, 2015 after the ACC detained him for three months and two days and denied bail as he couldn’t arrange a guarantor and pay Nu 184M for tax evasion.

Rinzin Wangchuk

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