Pranab’s litany of fallacies by Ravi Shanker Kapoor

Finance Minister Pranab Mukherjee’s insistence that his government has the right to tax the Vodafone transaction is an assault on the rule of law. He has tried to use nationalist rhetoric to justify the action but demagoguery is a poor cover for something which is indubitably reprehensible.

“There cannot be a situation that somebody will make money on an asset located in India and will not pay tax either in India or to the country of its origin… because of making some arrangements through certain tax haven areas through a complicated setting up of series of subsidiaries and having huge capital gains on the assets located in India,” he said in his reply to the debate on the Finance Bill, 2012, in the Lok Sabha.

That’s right, but for this there ought to laws which would make corporations pay tax on any asset located in India. The Direct Tax Code Bill could have done the job but it could not be passed because the government was not sure of the requisite numbers needed. However, it could have brought the required changes in the existing rules to bring the Vodafone transaction within the ambit of taxmen, which it did not do thanks to the never loosening red tape.

Now that the government has lost the case in the Supreme Court, it is crying hoarse over the lost revenue. The question is much bigger than the Rs 20,000-crore lost: it is about the government’s stance towards the rule of law.

The rule of law is the cornerstone of any civilized existence. A set of predetermined laws are supposed to be followed by citizens, businesses, and government. It is for the judiciary to interpret laws and adjudicate over various issues accordingly. In fact, the government is not only expected to follow laws but also ensure that these are followed by others. But here we have a government that, instead of accepting the verdict of the country’s highest court, is adamant on rejecting it.

Mukherjee is using every trick to defy the apex court. “I am fully aware of my right as a legislator; law-making power only vests in Parliament. The Supreme Court may interpret law but equally Parliament has right—legislative right—to express its intention by making amendment to correct the SC judgment,” he Mukherjee said.

This statement is positively dangerous, as it gnaws at the basic structure of our polity. For if Parliament has the right to “correct” a SC judgment, what remains ‘supreme’ in the nomenclature of the apex court? And why did the government approach the Supreme Court in the Vodafone case in the first place and waste the time and effort of its own officers and of the British telecom major? It could itself have decided to impose the tax.

Today, the government insists on correcting the Vodafone judgment; tomorrow, it may like to correct the verdict in the 2G scam. The hallowed concept of the separation of powers would cease to exist.

Jingoistic call was another trick Pranab deployed to buttress his arguments. He tried to justify the retrospective amendment in tax law to overturn the apex court’s verdict on the Vodafone case by saying that the United Kingdom did something similar in 2008, “If they are entitled, then surely India is equally entitled. India is not an inferior country compared to anyone.”

This is another specious plea. Somebody else’s bad action does not justify our ill behavior. Would India ban driving by women because Saudi Arabia does not allow it? Of course, India, being a sovereign nation, could to do that; but sovereignty should not be used to choose rotten benchmarks (The Central government has developed a penchant for rotten benchmark. For instance, it wants to emulate China in its drive against social media, but that is another story). Mukherjee’s jingoism is a bad excuse, not a good argument.

At the heart of the problem is the growing concern about fiscal deficit. Thanks to its mindless populism and unprecedented mis-governance, the Congress-led regime at the Centre finds the exchequer drained. The demands from party president Sonia Gandhi, however, are unrelenting; for instance, she is obstinate about the fiscally and economically ruinous food security law. Mukherjee―or, for that matter, even his boss, Prime Minister Manmohan Singh―can’t say no to her. Hence the desperate measures. And hence the litany of fallacies.


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