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Direct Tax Alert - The Tribunals Reforms (Rationalisation and Conditions of Service) Bill, 2021 tabled in Lok Sabha

02 March 2021

With an objective to streamline the functioning of Tribunals, seven Tribunals were abolished or merged based on the functional similarity by the Finance Act, 2017. Subsequently, it was observed that Tribunals in several sectors have not necessarily led to faster justice delivery and are also considerable expense to the exchequer. Hence, for further streamlining of the Tribunals, the Hon’ble Finance Minister Smt. Nirmala Sitharaman tabled The Tribunals Reforms (Rationalisation and Conditions of Service) Bill, 2021 (the Bill) before the Lok Sabha (lower house of Parliament). The purpose of this Bill is to abolish certain Tribunals and Authorities and to provide a mechanism for filing an appeal directly to the commercial courts or High Courts, as the case may be. The Tribunals that are proposed to be abolished in this phase are of the kinds which handle cases in which the public at large were not  litigants or those which neither took away any significant workload from High Courts (which otherwise would have adjudicated such cases) nor provide speedy disposal.

We, at BDO India, have summarised this Bill and provided our comments hereunder:

Which Tribunals are proposed to be abolished?

Tribunals or Authorities referring in following Acts are proposed to be abolished through making amendment in the respective Acts:

  1. Cinematograph Act, 1952
  2. Copyrights Act, 1957
  3. Customs Act, 1962
  4. Patents Act, 1970
  5. Airports Authority of India Act, 1994
  6. Trade Marks Act, 1999
  7. Geographical Indication of Goods (Registration and Protection) Act, 1999
  8. Protection of Plant Varieties and Farmers Rights Act, 2001
  9. Control of National Highways (Land and Traffic) Act, 2002
  10. Finance Act, 2017.

What will happen to the matters pending before the Tribunals?

All the matters pending before such Tribunals or Authorities shall be transferred to the Commercial Court or the High Court, as the case maybe, on the appointed date.

Whether the Tax Tribunal referred under Income-tax Act, 1961 (IT Act) is covered by this Bill?

Yes, the provisions of this Bill would be applicable to the IT Act as well since the Finance Act 2017 refers to amendments made by it in the provisions pertaining to the Tax Tribunal

What are the key changes relevant for Tax Tribunals referred in the IT Act?

  • Minimum age of a person to be eligible to be selected as Chairperson or Member of the Tax Tribunal is proposed to be kept as 50 years.
  • The Chairperson and Members of a Tribunal are proposed to be appointed by the Central Government on the recommendation of a Search-cum-Selection Committee constituted under sub-section (3) of section 184 of the IT Act, in such manner as the Central Government may provide. Rules may be issued for this purpose.
  • The Chairperson of the Committee to have the casting vote.
  • The Member-Secretary of the Committee not to have any vote.
  • No appointment shall be invalid merely by reason of any vacancy or absence in the Committee.
  • The Chairperson and Member of a Tribunal to be eligible for re-appointment in accordance with the provisions of the new section.
  • The Chairperson of a Tribunal to hold office for a term of 4 years or till he attains the age of 70 years, whichever is earlier.
  • Member of a Tribunal to hold office for a term of 4 years or till he attains the age of 67 years, whichever is earlier.

BDO comments

By abolishing various Tribunals, the Government aims to reduce the existing burden on the exchequer. However, whether the long drawn pending litigation would see an end is a question which will take some more years to be addressed. The proposal to cap the tenure of Chairperson or member in a Tribunal at 4 years is with an intent to override the Supreme Court’s decision1 which stipulated that the minimum term must be 5 years.

1 Madras Bar Association versus Union of India