Brief of newspaper articles for the day bearing
relevance to Civil Services preparation
- GS PAPER 2
- SC favours trust vote in Uttarakhand {Functioning of the Judiciary}
- Transgenders get space in birth and death certificates { Schemes for vulnerable section}
- Pay if you want F-16s, US tells Pakistan { Foreign Policy}
- India’s problem with the girl child {Social issue}
- Vote to stay in EU isn’t vote for Europe {Global Groupings}
- Allow ‘surge’ in MGNREGA jobs { Social issue}
- GS PAPER 3
- Mangoes that pack a vitamin punch {Agriculture}
- The indirect benefits transfer {Indian Economy}
- A job for every Indian {Indian Economy}
- Facilitating trade in Indian ports { Infrastructure}
- Mobiles to help verify beneficiaries {PDS}
- Tips are not salary income, still taxable: SC {Economy}
GS PAPER 2
[1] SC favours trust vote in Uttarakhand
News
- The Supreme Court affirmed that a “floor test is the ultimate test” to decide who is in power, and asked the Centre to consider having a trust vote in the Uttarakhand Assembly to determine whether the Harish Rawat-led Congress government has a majority.
- It would temporarily suspend President’s Rule to facilitate the floor test.
Supreme court said
- Both horse trading and airing of sting operation created a dent in democracy. That is why floor test is important.
- Suggested that a floor test be conducted immediately after lifting President’s Rule for three days. The results of the exercise could be submitted in court, it had proposed.
- Because there cannot be president rule and floor test at the same time.
- Suggested that a floor test be conducted immediately after lifting President’s Rule for three days. The results of the exercise could be submitted in court, it had proposed.
[2] Transgenders get space in birth and death certificates
What happened?
- Delhi government has decided to introduce the ‘transgender’ category in forms for registration of birth and death certificates.
Background
- Supreme Court in its landmark judgment in April 2014 has recognised transgender as third gender.
View of the Community
- Transgenders said that though it is a small thing but at least there is a sign of recognition.
[3] Pay if you want F-16s, US tells Pakistan
What happened?
- U.S. has announced that it would not be financing the sale of F-16 fighter jets to Pakistan.
What was the original plan?
- The original plan was to sell eight F-16s to Pakistan and finance most of the $699 million deal through Foreign Military Financing (FMF).
Why this turnaround?
- US Government has announced that they would not approve FMF for Pakistan until it demonstrated “behavioral changes” in its support of terrorism and its dealings with India.
Stand of India
- India has been strongly protesting the U.S. decision to give these fighter planes to Pakistan.
- India has said these fighters could be used to threaten India
[4] India’s problem with the girl child
Context
- Gujarat chief minister Anandiben Patel, speaking at a public function said that a new woman and child hospital, provided for in the state budget, would have in “research on why, for what reason, back-to-back daughters are born”. Her intention migt br to speak of the unfairness of women being blamed for having daughters and allow that some families might have only sons and want a daughter.But this brings up two issues at the forefront.
Issues
- Sex preference has become a pressing socio cultural, humanitarian and economic issue in India.
- In the field of DNA testing and modification in the context of babies born with mental and physical challenges, governments and scientists are still struggling to frame the ethical terms of the debate.
- The pressing issue of sex preference and female Infant mortality
United Nations Department of Economic and Social Affairs data reveals that :
- India is one of only two countries—China is the other—where female infant mortality is higher than male infant mortality in the 21st century.
- And in child mortality sex ratio, India is, by some distance, the worst in the world.
The report highlighted that given the strong biological advantage that girls enjoy in early childhood, this can only be explained by “differential treatment or access to resources, putting girls at a disadvantage”.
Foetal sex determination and selective abortion are endemic problems nationwide.
- The Preconception and Prenatal Diagnostic Techniques Act (PCPNDT), 1994, has proved ineffective. Backed by British medical journal Lancet estimated that up to 12 million female foetuses had been aborted in India over the previous three decades.
- Yet, in the majority of states, not a single case has been registered under the PCPNDT Act. In the states, where a handful have been charged, there have been no convictions.
Consequences
- Decline in child gender ratio to an extent of 945 girls per 1,000 boys in 1991 to 927 girls per 1,000 boys in 2011 as per census data
- Very low ratios in some states like Rajasthan, Haryana and Punjab bring out some destructive practices such as “buying” brides from other states
- Human trafficking and human rights abuses.
- Unclear ethical boundaries of DNA testing and modification
The rapid advances related to DNA research and genetic testing has its own implications of such technology in a society where the girl child is still considered a liability are troubling—particularly when legislation and enforcement dealing with existing technology have been so lacking.
But these kind of testing has its own benefits.
- In finding Birth defects and genetic conditions such as Down’s Syndrome
- This is the importance when it comes to making an informed choice about carrying a pregnancy to term.
- But the more the field advances, the greater the tension between utilitarianism and traditional norms that see a utilitarian approach as harmful to a healthy society.
Now the questions arises:
- Will the majority of parents also choose to terminate a pregnancy where autism has been detected as they do with Down’s Syndrome, for instance?
- If so, what point on the spectrum would be considered a red line?
- For that matter, where would the line be drawn for which conditions justify termination?
- And Who would draw it?
Conclusion
- PCPNDT,1994 must be reviewed and given more teeth than it has.
- There must be a wider debate examining this intersection of science and Indian society.
[5] Vote to stay in EU isn’t vote for Europe
Context
- According to the author , Britain should stay in EU, not for the sake of EU but for itself, so that it does not get punished for leaving EU. It should wait till EU asks Britain to leave.
Britain should learn from Scotland
- In 2014, the Scots voted with their heads, not their hearts, to stay in the UK—then at the following general election, gave the Scottish National Party, dedicated to Scottish independence, a crushing victory north of the border.
- The thinking seemed to be: the safe choice is to stick with the UK, but please understand we aren’t happy and might change our minds at short notice.
- The UK’s calculation on Europe is similar.
- Quitting the EU is a big economic risk, so prudence says stay.
- But, doing the prudent thing will only make Britain more resentful and UK will be more eurosceptic and the careers of anti-EU politicians such as Boris Johnson will be far from over.
Economics considerations behind Brexit
- The case for stay is gaining strength thanks to reports which predict long-term losses of around 5% of gross domestic product a year, equivalent to several thousand pounds per household.
- A recent rejoinder from a group of eurosceptic economists, arguing that Britain’s economy would get a boost from the exit, doesn’t carry the same weight.
Retaliation by the EU, if Britain leaves
- None of the these reports consider the option of unilateral free trade, which would likely be the best-case scenario post-Brexit.
- Instead, they dwell on the costs and protracted delays involved in negotiating new preferential trade agreements with the EU and Britain’s other trading partners.
- If there is retaliation by the EU, the official worst-case estimates might be too small.
- Tariffs are capped by the World Trade Organization, but there’s plenty of scope for behind-the-border protectionism aimed at services, where the WTO’s writ does not run, and EU can hurt Britain through these measures.
The smart way
- Having refused to adopt the euro, the UK is already semi-detached from the EU’s main economic project.
- It has opt-outs in other areas of policy too.
- This distance is going to widen under the pressure of heightened eurosceptic sentiment following a vote to stay.
- Over time, as the euro area pursues closer integration in fiscal and financial policy, Britain will become even more of an anomaly—and demands for Brexit won’t subside.
- Eventually, the EU might come to agree that Brexit makes sense.
Conclusion
- Remember, the biggest risk in Brexit is that the EU will punish Britain for leaving.
- The answer is obvious. Vote to stay—then bring the EU to the point where it will pay Britain to go.
[6] Allow ‘surge’ in MGNREGA jobs
Context
- A “surge pricing” method should be applied to implementing MGNREGA.
- In reference to MGNREGA, surge pricing means that the estimated requirement of funds which is Rs.50,000 crore, has been under-provided.
- That money needs to be released now (in a “surge”) rather than later, when demand for work slackens.
What is surge pricing?
- “Surge pricing” occurs when a company raises the price of its offering if there is an increase in demand.
- Company raises prices when demand is strong and lower prices when demand is weak.
Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA)
- Right to work or livelihood is not a fundamental right, but is enshrined in the Directive Principles in the Constitution of India.
- MGNREGA built on the experience of many predecessors, most notably Maharashtra’s Employment Guarantee Scheme (EGS), which originated in the drought of 1972.
- MGNREGA is designed to provide job guarantee for at least 100 days in rural parts of the country. through this scheme , all the adult members ( at least 18 years of age) of the any family in rural part of the country are given non-skilled work.
- The program provides a legal guarantee for one hundred days of occupation in every financial year to mature associates of any rural family willing to do public work.
- MGNREGA is funded by the Union budget, and administered by village councils (panchayats).
Attractive features of MGNREGA
- It is self-targeting.
- It works like unemployment insurance in the absence of a formal government-provided arrangement.
- It empowers women, since their participation has been consistently close to 50%.
- In an indirect way, it might contribute to reducing the stress of urban migration.
- If properly planned and implemented, it can create rural assets and public goods.
- This work entitlement acts as a proxy for genuine land reform, and also increases the bargaining power of labour.
Objections against MGNREGA
- There are stories of fake muster rolls, ghost work sites, payment to workers for no work, corruption and leakage in payments and so on. Much of these can be taken care of with better audit processes and other fixes.
- The more principled objection has come from the fact that the scheme is a labour market intervention, skews incentives and is distortionary.
Case for Surge Pricing in MGNREGA
- Sectors that depended on seasonal and migrant labour, typically from states like Bihar, Jharkhand and Odisha, such as construction, sugarcane harvesting and textiles, complained that MGNREGA was a deterrent to dynamic migration.
- The surge in demand for rural works is highest in pre-monsoon months, when rivers and wells are parched, and there is shortage of drinking water, fodder for cattle, food and employment.
- The economy is also facing a drought of jobs, as job creation in eight key industries has declined sharply.
- This may well be a transitory phenomenon, and a good monsoon, along with aggressive public spending on infrastructure, can turn the sentiment later in the year.
- Hence, it is imperative that a “surge pricing” mindset be applied to implementing MGNREGA, now, in the summer months.
GS PAPER 3
[1] Mangoes that pack a vitamin punch
Mangoes are treat of the summers.
Some nutritional facts about mango:
- It has decent amount of energy.
- It does not have fat at all.(shocking right).
- Most important it has many vitamins.
- 1. Vit A
- 2. Vit C
There is one variety of mango called Manoranjitham found in Chittoor, Andhra pradesh
- it is high in vit A.
- Helps fight night blindness
But, not many beyond that region are aware of its special property. It is among hundreds of fruits that are underutilised.
Horticulturists scramble to save nutraceutical fruit species.
- Researchers prepare to preserve, develop and promote the exotic fruit species.
Symposium organised:
- In Bengaluru
- Jointly by the Indian Council of Agricultural Research (ICAR) and the Indian Institute of Horticultural Research (IIHR).
- scientists from 20 States discussed ‘Fruit breeding in tropics and sub-tropics’.
- They have begun the process of listing underutilised exotic fruit varieties.
India has large fruit wealth, we found some of them facing the threat of extinction. That’s why we have decided to develop and promote them, said by senior official.
Preserving and promoting them will have twin benefits
- higher revenue for farmers
- improved health of people.
Appropriate processing technologies to tap the full potential of exotic fruits including litchi, dragon fruit, rambutan, longan, avocado and velvette apple will be used.
Dwarf varities:
The conference is also looking at the possibility of developing dwarf varieties of fruit crops to help farmers pluck the produce easily, without hiring more labourers.Dwarf varieties
- Such varieties are needed to suit the present trend of high-density planting.
Gene bank
- For those who cherish mango appe midi , the traditional pickle varieties of mango from Karnataka, there is good news.
- The IIHR has preserved nearly 85 threatened varieties in a gene bank through molecular characterisation.
- These are available from IIHR for cultivation.
Additional information:
- Nutraceuticals is a broad umbrella term that is used to describe any product derived from food sources with extra health benefits in addition to the basic nutritional value found in foods.
[2] The indirect benefits transfer
News
- India’s income tax department released time series data for the period 2000-01 to 2014-15 last week.
Why?
- To enhance transparency and encourage analysis which could provide insights for policymakers. That’s a good beginning.
Issue
Indian economic policy is facing a dual problem: a declared attempt at fiscal consolidation, combined with a reluctance to do what it takes to raise tax revenues. This juxtaposition has lead to a squeeze on Central government expenditures, and particularly those relating to social spending that directly affects most people in the country.
- Decline in Public Spending
Despite various signs of economic slowdown such as languishing industrial production and adverse effects of the drought on rural livelihoods and demand, the government is apparently unable or unwilling to increase public spending to mitigate people’s material distress or to kick-start economic activity to increase employment.
The official reason cited is that there just isn’t enough money in the public coffers to do this. Now, with limited money at disposal of the govt.an increase in public spending will cause the fiscal deficit to increase, which is seen as unacceptable not because of the inflationary implications, but also because it will send a “wrong signal” to global investors and therefore affect future investment and growth.
- Decline of direct taxes
If fiscal deficit targets are sought to be maintained, the only way to provide the necessary increases in public spending is to increase government revenues, and tax revenues in particular provide the obvious mechanism. But India’s record in collecting taxes has been pathetic, and recently has been getting even worse.
- India already has one of the lowest tax-to-GDP ratios among the G20 countries — in fact, only Mexico and Indonesia perform as poorly.
- This is not just because India’s per capita income is still relatively low; many countries that are even lower in the income ladder show higher ratios. At around 18 per cent (for Central and State governments combined), the tax-to-GDP ratio in India is lower than several Sub-Saharan African countries and significantly below China.
The recent trend in tax revenues
New data from the Ministry of Finance reveal how tax revenues — and particularly direct taxes — have moved in recent years.
- The first disturbing trend is that the tax-to-GDP ratio has barely increased over the years of the economic boom, unlike the expected pattern whereby it increases as incomes rise. So economic growth has not delivered greater fiscal space for public spending to meet the needs of citizens.
- More worryingly, there is a greater reliance on indirect taxes, which are inherently more regressive because they fall disproportionately on the poor. Because the poor tend to spend nearly all of their income, they end up paying substantial amounts of taxes in the form of excise duties, sales taxes and import tariffs that are reflected in higher prices. By contrast, the rich do not spend all of their income, and they are able to utilise various tax incentives provided to savers and producers to reduce their tax burden.
In 2009-10, direct taxes peaked at 60.8 per cent of total taxes and the provisional data for 2015-16 suggest that the share of direct taxes was only 51 per cent. This also because direct tax collections did not even increase as rapidly as money incomes did. In 2014-15, nominal GDP increased by 10.5 per cent but direct tax collections increased by less than 9 per cent. In 2015-16, nominal GDP increased by 8.2 per cent but direct taxes increased by only 6.7 per cent.
In that same year, indirect taxes increased by a whopping 31 percent, as the government chose to grab all benefits of the lower global oil prices through successive increase in petroleum product duties. So, increasingly, the poor have been paying to provide revenues for the Central government.
Corporate tax avoidance
- The tax system provides many tax breaks and incentives to rich individuals and companies, that allow them to avoid paying the full tax rate. So, quite apart from the illegal tax-avoidance mechanisms that were so blatantly revealed by the Panama Papers, it is possible for the rich to reduce the effective tax rate through perfectly legal use of loopholes and concessions.
- Corporate taxes have not increased as they should have along with corporate profits. Although the statutory rate of taxation for companies is 33.84 per cent, the average tax rate actually paid in 2014-15 was only 24.64 per cent. The larger the companies (and profits), the lower the effective tax rates: companies that had profits of less than Rs.1 crore paid taxes at 29.37 per cent, but those with profits in excess of Rs.500 crore paid only 22.88 per cent. Public sector companies had a higher tax rate than private sector companies, which are obviously more oriented towards aggressive “tax planning”.
This is a clear depiction that some sectors have benefited disproportionately, with massive declines in effective tax rates in the past five years. These include financial leasing companies, for which the effective tax rates fell from 21.94 per cent in 2010-11 to 1.53 per cent in 2014-15, and mining contractors, for which the drop was from 32.29 to 14.02 per cent. It is hard to miss the political significance of some of these beneficiaries.
The Budget documents also provides the estimates of the revenues foregone through various tax concessions that are explicit and legal. In the past two years these have amounted to as much as 4.5 per cent of GDP — significantly higher than the declared fiscal deficit.
Individual savings stratagems
- Personal income tax collection is similarly inadequate.
- The data show that the number of individual tax assessees was only 48.6 million in 2014-15, just 6 per cent of the estimated adult population of around 800 million in that year.
- Many of these assessees do not actually pay any income tax; in fact, data for 2012-13 suggest that around 2 million taxpayers accounted for the bulk of the personal income tax collections. But even here the underestimation of taxes due is clearly evident.
- Given the amount of luxury consumption that is openly flaunted across India, who can believe that in 2012-13 less than 20,000 people across the country had annual incomes of more than Rs.1 crore?
The opportunity cost of these losses in tax revenue.
- The amount of Rs.1,28,639 crore in direct tax concessions in 2015-16, which was a gift to rich individuals and corporations, can be compared with other important expenditures.
- Only Rs.35,754 crore was spent on the Mahatma Gandhi National Rural Employment Guarantee Scheme, which could benefit several hundred million rural people if only it were to be taken seriously.
- The Integrated Child Development Services (ICDS) got only Rs.15,394 crore, while maternal and infant health and nutrition indicators remain appalling in most of India.
- School education got only Rs.42,187 crore even though government schooling is woefully inadequate in terms of both quantity and quality.
- The expenditure on all these put together could have been doubled, simply with the amount given away as tax breaks.
India needs to spend on health, education and social security and also build social and physical infrastructure, it is critical to address the challenges on the tax policy front swiftly.
And the challenges are:
- Widening and deepening of the tax base
- Whittling down of exemptions and improving compliance, especially by leveraging technology.
Conclusion:
- Fiscal consolidation does not mean that public spending in the areas where it is necessary, should be curtailed. An efficient approach towards fiscal consolidation is increasing the tax revenue, especially the direct tax revenue.
- Indian govt. should no more follow the piecemeal approach where it is strangulation the its spending in the needed areas, instead it should focus on eliminating the unnecessary tax exemptions .
[3] A job for every Indian
Context
The Labour Bureau has compiled statistics for job creation in labour-intensive sectors in the country each quarter since the 2008 global financial crisis.
Key points
- The latest figures show that 1.35 lakh jobs were created in 2015, the lowest figure by far of any year since then — lower than the 4.9 lakh new jobs in 2014 and 12.5 lakh in 2009.
- In fact, the last quarter of 2015 recorded job losses.
- Private surveys suggest that the services sector will hire more than manufacturing this year, but there is little to suggest that this will be sharp enough to gainfully employ the one crore Indians who enter the workforce annually.
Challenges Ahead
Annual economic growth has dipped somewhat since 2009-10, but the challenge for the country remains as stark: how to better its job creation for every percentage point of GDP growth, a ratio on which it significantly lags behind most other emerging economies.
Are we ready?
- According to a Government report.,175 million new jobs could be created by 2032 if the economy grows by 10 per cent annually; the figure is 115 million if it grows by 7 per cent.
- To create jobs on such a scale, it proposes tax incentives and interest subsidies for firms creating jobs and some blue-sky interventions to invigorate sectors.
- For instance, negotiate free trade pacts with major markets such as the European Union and the U.S. to boost textiles, improve regional air connectivity for tourism, and so on.
What we really need?
We need a holistic action plan that covers every base — one that includes
- A skilling and re-skilling programme to increase employability and productivity
- Incentives for smaller enterprises that absorb a greater number of workers
- And the embedding of job generation in the massive infrastructure upgrade that India requires.
Jobs must be the pivot for social and economic policy.
[4] Facilitating trade in Indian ports
Importance of Indian Port
- The Indian port sector plays a vital role in sustaining growth in the country’s trade and commerce.
- It also has an important role in fulfilling India’s dream of achieving greater global engagement and integration with its trading partners.
- Much of India’s port-led development initiative is expected to revolve around growth in maritime trade, given its share in terms of both volume and value in the country’s overall trade statistics.
Initiatives taken by Government to strengthen this sector
- Development of new ports
- Modernisation and mechanisation of the existing ports,
- Reduction of logistics costs through the implementation of increased waterways transport.
- These are also in line with the vision of initiatives such as ‘Make in India’.
Issues faced by various ports
- Seaports displayed specific patterns of issues based on differences in geography, infrastructural capacity, operational aspects, contractual arrangements, and so on.
- Haldia Port, West Bengal, being a riverine port, faces the natural challenge of heavy siltation and inadequate dredging capacities.
- In Paradip Port, Odisha, there is issue of semi-mechanisation and manual handling of critical processes having a cascading effect on overall operational efficiency. It highlights the importance of complete mechanisation of processes to ensure seamless operations and thereby lower down vessel turnaround time.
- Congestion at the approach roads is a common problem observed at the Jawaharlal Nehru Port in Maharashtra.
- Underutilisation of physical infrastructure in particular though is extremely prevalent at another private terminal — the Vallarpadam International Container Transhipment Terminal — at the Cochin Port.
Bolstering prospective ventures
As India eyes a resurgence in port-led activities in the country, these issues, though specific to certain ports, indicate the need for the Central government to undertake measures to facilitate trade through Indian ports, either in terms of building and maintaining infrastructure for handling desired capacities or undertaking relevant policy and regulatory reforms.
For Infrastructure
- It is important to maintain draft to serve bigger vessels
- Ensure mechanisation of ports through introduction of new equipment and procedures
- Build new facilities
- Upgrade existing facilities
- Automate systems/procedures.
For policy and regulatory reforms
- It is important to streamline tariff determination by TAMP along with a provision for periodic revisions
- Ensure transparent and effective contractual arrangements in PPPs
- Implement strengthened communication platforms for seamless information flow among stakeholders
- Strengthen system integration
- Ensure paperless clearance of procedures and transactions
- Develop user information portals
Conclusion
- Apart from reviving the ports currently operational, these measures, if duly incorporated, promise to sufficiently bolster prospective ventures as the country moves towards an optimistic maritime trade regime.
[5] Mobiles to help verify beneficiaries
News:
- The government is planning to introduce mobile verification system at the time of availing public service benefits.
The Plan:
- The beneficiary needs to inform the authorities of his or her unique registration number in the government-sponsored scheme following which a one-time password (OTP) will be sent to the beneficiary through SMS on their registered mobile number in Aadhaar to verify the individual’s identity.
What must be done:
- To educate the beneficiaries, especially in the rural areas regarding such a service.
- Beneficiaries must keep their latest mobile phone numbers registered or updated with Aadhaar so as to easily avail benefits in various social sector schemes of the government
Where to begin with?
- Government will test this technology in the National Health Protection Scheme (NHPS) that it proposes to roll out soon for under-privileged households.
What is this National Health Protection Scheme (NHPS)?
- Central government scheme announced this year’s budget.
- Under the scheme, health insurance cover of up to Rs.1 lakh per family will be given in case of serious illness of family members.
- An additional insurance cover of Rs. 30,000 will be provided for each senior citizen in the family.
How it will work?
- Once the family is enrolled under NHPS, its members can go to any of the empanelled hospitals to avail the health insurance benefits.
- Hospitals having good Internet connectivity will do online authentication of the beneficiary using biometrics of any of the family members.
- However, in a few hospitals, situated in remote or unconnected areas, where there is a lack of good Internet connectivity, mobile phone numbers registered with Aadhaar will be used to verify the identity of the beneficiary.
- The SMS sent to the beneficiary will also reflect the balance amount of the health insurance scheme.
- This will help in checking frauds at various levels by keeping the beneficiaries of the scheme in loop at every stage.
What if other person avails benefits by using a genuine beneficiary’s mobile phone?
- Government has plan to address this kind of frauds also.
- By the time medical treatment starts, the authorities can verify her identity by checking other photo identity cards.
- This will also ensure speedy treatment of the patient in case of medical emergency.
- By the time medical treatment starts, the authorities can verify her identity by checking other photo identity cards.
What more?
- For smartphone users, the government will unveil UMANG (Unified Mobile Application for New-age Governance)
- which will consolidate about 200 major central and state services under a single unified platform.
[6] Tips are not salary income, still taxable: SC
Issue
- Supreme Court has given its judgement on the issue whether tips constituted salary-income or income from other sources and whether the employer was obliged to ‘withhold’ the tax.
Stand of Tax Authority
- The Tax Authority, in this case the Commissioner of Income Tax (TDS), contended that such tips constituted the salary-income of waiters and the tax-payer (employer) was obliged to withhold taxes and remit them to the authorities.
- The authority treated the taxpayer as assessee-in-default and sought to recover the tax shortfall with interest.
- It also levied a penalty.
- Its contention was that tips from customers were salary-income of waiters as “profits in lieu of salary” and salary included salary paid or allowed to an employee by or on behalf of an employer.
Stand of the Taxpayer (ITC)
- It contended that tips were received directly by the waiters from customers and the tax-payer merely acted as a trustee, collecting tips and passing it on to the employees.
- Since tips did not constitute salary-income of the employees, the taxpayer had no obligation to withhold tax and could not be treated as a defaulter-assessee.
Judgement of the Court
- Supreme Court held that since tips were received voluntarily from customers and employee-waiters had no vested right against the employer to claim any such amount, it did not constitute salary-income.
- There is no dispute that tips are taxable income, but it is income from other sources, the court said.
- According to the court, the employer merely acts in a fiduciary capacity as a trustee for payments that are received from customers, which they disburse to their employees for services rendered to the customer.
- The employer, therefore, has no obligation to withhold tax on such payments made to employees, regardless of whether the tips are received directly in cash, or collected through credit card by employer, and subsequently disbursed to employees.
1. The lead article of the day is covered under Editorial Today. Click here to read.
Leave a Reply