How the Passage of the Taxation Laws Amendment Bill Reflected the Trend of Institutional Failures of the Parliament

On 1 December 2016, members of 16 opposition parties submitted a memorandum to President Pranab Mukherjee protesting the manner in which the Income Tax (Second Amendment) Bill, 2016 was passed in parliament. PTI
Elections 2024
31 January, 2017

The 2016 winter session of parliament, which began on 16 November, was expected to be a stormy one. The previous week, the government had announced its decision to demonetise notes of Rs 500 and Rs 1,000. Beginning on the first day, for two weeks, members of opposition parties repeatedly obstructed proceedings of the Lok Sabha with their criticism of the demonetisation. In the midst of the pandemonium, a side act was playing out in the lower house: in a span of two days, the government introduced and passed a bill that amended the Income Tax Act of 1961 and the Finance Act of 2016. On 28 November, the Taxation Laws (Second Amendment) Bill, 2016, was listed for introduction in a supplementary list to the original list of business in the Lok Sabha for that day. The following day, the bill was taken up amid sloganeering and passed without a debate.

When the speaker, Sumitra Mahajan, took up the bill in parliament, several leaders voiced criticism of the manner in which it was introduced. Sundip Bandhyopadhyay, from the Trinamool Congress (TMC), said to the house, “We are not prepared yesterday to study it either. It was a very hasty decision,”  Bhartruhari Mahtab, from the Biju Janta Dal, said that the bill would have serious repercussions on the taxation policy of the country. Mahtab also criticised the introduction of the bill. He said, “In all urgency, it was brought yesterday. It was not listed. Today it is listed for consideration and passing.” He then said that the deliberations in Lok Sabha would improve the structure of the bill. Sugata Roy of the TMC added, “Madam, this should not happen. The future of the nation is at stake. This government’s effort of no discussion on the bill should not be allowed. We should have a proper discussion.” These procedural concerns of members went unaddressed by the speaker.

Following that, NK Premachandran, of the Revolutionary Socialist Party, raised a point of order—a query regarding whether proper parliamentary procedure was followed—concerning the time granted to move amendments. Mahajan responded by saying that these would be addressed after the bill had been formally introduced and was under consideration by the house. When the bill was being considered however, she rejected all points of order, citing the “urgency involved.” “We have to dispose of the bill today itself,” she said.

The taxation laws amendment bill introduces a scheme for self-declaration of undisclosed income, called the Pradhan Mantri Garib Kalyan Yojana (PMGKY). It imposes a tax of 30 percent and a penalty of 10 percent on the undisclosed income, along with a cess of 33 percent on tax. It requires a deposit of 25 percent of the undisclosed income into the PMGKY fund—without earning any interest—and prohibits its withdrawal for four years. If the tax authorities discover unexplained income that has not been declared, the bill imposes a 60 percent tax on this income, along with a surcharge on the tax of 25 percent, and penalty of 10 percent. The thrust of the bill was to supplement the demonetisation move of the government by taxing unaccounted incomes at higher rates.

A distressing outcome of the political stalemate and the disruption of parliamentary functioning in the winter session was the passage of this bill without any discussion and scrutiny by the Lok Sabha. Every piece of legislation needs to be thoroughly scrutinised by parliament. This becomes even more important in case of legislation like the taxation laws amendment bill, for two reasons. For one, the bill undertakes important fiscal measures such as imposing taxes and penalties. Secondly, the bill is only subjected to discussion in the lower house—a financial legislation does not go through added debate and scrutiny in the Rajya Sabha. The manner in which the bill was passed is a trend in the Indian parliament, and is reflective of its institutional failure.

The functioning and deliberative nature of the Lok Sabha is governed by regulations titled Rules of Procedure and Conduct of Business, which came into force in 1952. These rules prescribed multiple levels of scrutiny that a bill should go through in parliament before it can be adopted as law. Not all rules listed in this document are mandatory. Some rules are subject to the discretion of the presiding officer of the house—the speaker of the Lok Sabha, or the chairman of Rajya Sabha—and could be used to expedite legislation. The rules of procedure do not include the grounds upon which the presiding officers may exercise such discretion. W necessary for empowering the speaker and the chairman to run the house smoothly, such discretion can also allow a bill to be passed without a detailed examination, as it happened in this case.

The practice of passing bills without due regard to the safeguards of prescribed in the rules is not a novel phenomenon. According to data collated and published by PRS Legislative Research, an independent non-profit organisation, 36 percent of the bills passed were discussed for less than 30 minutes each. Of these, 20 bills were passed in less than five minutes each. (Disclosure: I am currently the head of outreach at PRS). Many bills, which addressed a range of issues including women’s reservation in legislative bodies, food security, land acquisition and the creation of Telangana, were passed amid protests by MPs. PRS Legislative Research also published data highlighting that, in the 2014 winter session, the current Lok Sabha approved 11 bills without referring them to a parliamentary committee.

Broadly, a bill goes through three levels of parliamentary scrutiny. The first level of scrutiny begins at the time the bill is introduced in parliament. The rules of procedure require a copy of the bill to be circulated to members of parliament two days before its introduction. This gives MPs an opportunity to read the bill and decide if they want to oppose it by voting against the motion for introduction in their house. If the motion is defeated, the bill is not introduced. In 2009, for instance, Veerappa Moily, the former law minister, was unsuccessful in introducing the Judges (Declaration of Assets and Liabilities) Bill, 2009 in Rajya Sabha, after opposition parties objected to a clause in the bill that stated that judges of the higher judiciary did not need to publicly declare their assets. Sensing the mood of the house, Moily decided against moving a motion for introducing his bill.

The second level of scrutiny takes place when the presiding officer of a house refers the bill to a parliamentary committee for a detailed examination. The committee invites testimony from the government, subject experts, and stakeholders. Its closed-door meetings discourage political grandstanding by participating MPs. Consequently, the report such a committee produces is usually comprehensive and makes recommendations for strengthening the bill. In April 2016, the parliamentary committee of the Lok Sabha submitted its report on the Consumer Protection Bill, which Ram Vilas Paswan, the union consumer affairs minister, had introduced in 2015. The committee examining this bill heard the views of 13 organisations representing consumer and industry interests. Officials from the ministry piloting the bill and the ministry of law and justice also testified before the committee.

The third level of scrutiny takes place in the two houses of parliament when a bill comes up for consideration and passing. MPs draw upon their experience on the subject and the parliamentary committee’s report while discussing the bill. Nuanced technical points coupled with the cut and thrust of political debate gives shape to the government's legislative proposal. After the debate, MPs propose changes to a bill, but the minister introducing the bill is under no obligation to accept the recommendations of either the parliamentary committee or the other members of Parliament. The third stage is aimed at strengthening and furthering the objectives of the bill.

However, none of this was followed in the passing of the tax amendment bill in the Lok Sabha. On 28 November 2016, at 2 pm, the bill was introduced in the Lok Sabha. A minister seeking to introduce a bill without prior circulation must provide reasons for the same to the speaker, who may give her permission for the bill to be included in the list of business for the day. The reasons given by the concerned minister are not publicly available.  The speaker gave Finance Minister Arun Jaitley permission to introduce the bill without circulating it to Lok Sabha members. The speaker also has the discretion to refer the bill to a parliamentary committee for scrutiny. Very often, MPs urge the speaker and the government to do so. The tax amendment bill, however, was not referred to a committee, nor did any members demand that it be referred.

The rules of procedure provide that MPs can move amendments to bills, which have to be submitted to the  parliament secretariat one day before the bill is to be taken up for consideration. Since the tax amendment bill was listed for consideration and passing the day after it was introduced, MPs were required to give their amendments to the bill by 12 pm the next day, before it would be taken up for consideration post-lunch. As a result, MPs were left with little time to study the bill and prepare suitable amendments. The difficulty in moving an amendment was compounded by the requirement of presidential assent. As per Articles 117 and 274 of the Constitution, any amendments to a bill varying a tax duty requires prior recommendation from the president before it can be moved in either house of parliament.

MPs strongly opposed the short span of time for moving amendments to the bill since its introduction. “Is it possible to obtain the President’s assent within a span of one hour? Honourable Finance Minister, is it possible? That means, you are bulldozing an important law without any homework,” said KC Venugopal, a member of the Indian National Congress. Premachandran, of the Revolutionary Socialist Party, moved seven amendments to the bill, five of which required the assent of the president, but did not hear back from the parliament secretariat about whether the president had assented assented to them at the time of consideration of the bill. He said that it should be communicated in writing whether the amendment “is withheld, whether it is assented or whether it is rejected. That is my first objection.” The speaker ruled that in the absence of the president’s recommendation to certain amendments, she could not permit them to be moved. At 3 pm on 29 November, the Lok Sabha passed the bill without any amendments.

It is alarming is that the unfortunate precedent of the passing of the income tax amendment bill is slowly becoming the norm of our legislative functioning. It is the responsibility of the presiding officers of the two houses of parliament to ensure that the houses function smoothly. They are the custodians of parliamentary functioning and they must ensure the safeguards of the parliamentary process are followed during the proceedings of the house. But fractured politics prevent them from discharging their function, and the discretion available to them weakens the scrutiny of parliament.

Political parties and the government are equally responsible for this trend. Parties work together to pass laws without discussion based on political convenience and consensus. For example, the Rajya Sabha’s winter session in 2014 saw severe disruption. On the last day, all political parties came together to pass the National Capital Territory of Delhi Laws (Special Provisions) Amendment Bill, 2014, with minimal debate. Among other things, the bill regularised unauthorised colonies in Delhi a month-and-a-half before the Delhi assembly elections. This was repeated in the winter session of 2015, when the upper house passed six bills without any discussion, four of which were passedon the last day of the session. Not everyone was on board with these decisions—when the four bills were being passed, the Left parties walked out of the house. Sukhendu Sekhar Roy of the Trinamool Congress appealed to the chairto allow the bills to be considered in the house. He said, “Sir, as per rule 124”—of the Rules of Procedure and Conduct of Business in Rajya Sabha—“we are supposed to discuss the bills, and even otherwise, all of us know that it is a central legislative assembly or a parliament, and, our foremost duty is to legislate. But without discussion, if we legislate all the time, then, we are carrying a wrong message to the nation.”

Bipartisanship is one of the mechanisms for ensuring a well-functioning parliament. Former Prime Minister Manmohan Singh alluded to this in his remarks on the last day of the fifteenth Lok Sabha. He said, “In parliamentary life, there are bound to be differences among parties but there must also be ways and means of finding pathways to bring minimum amount of consistency and reconciliation so that the ship of the Indian state can move forward. And we have seen that, on certain crucial matters, this house has the capacity, the will, to rise above partisan strife and to find pathways of national reconciliation.” One would hope that reasoned debate, which is the foundation of our parliament, does not get compromised on account of derisive politics.

In the case of the income tax amendment bill, almost all of the scrutiny mechanisms were bypassed. The entire institution is responsible for this. The government pushed for the bill to be passed without giving adequate time to MPs to study it, the speaker’s discretion resulted in the bill being sped through parliament, and the political parties’ disruptions on the demonetisation issue facilitated the passage of the bill without a discussion in the house. The institution needs to change its rules to make sure that legislative process is held sacrosanct, and that no one—including the government, political parties and itself—is able to circumvent it.