Tuesday, December 11, 2012

J S Verma on SC judgement on Vodafone

I return to my blog after a fairly long time- preoccupied on many fronts in recent weeks.

I wanted to flag Justice JS Verma's comments on the Supreme Court verdict on Vodafone. There has been much criticism of the government's attempt at changing the tax law retrospectively in the Vodafone case. Many have differed, however, with the SC's views in this particular case and it is interesting that Justice Verma is one of them.

Justice Verma gives two reasons for his difference of opinion with the SC judgement. One, he believes that "the three-judge judgment in Vodafone bypasses a five-judge constitution bench judgment in the McDowell matter in 1985. The McDowell judgment in substance said that in this context what you have to see is the substance of the transaction to determine the tax liability and not merely the form of the transaction." Justice Verma points out that a three-judge bench cannot bypass the view of the larger five-judge bench in the McDowell case.

The bigger reason, according to Justice Verma, is as follows (all quotes here are from the report in the Indian Express):
Judges need to be committed to constitutional philosophy and not the philosophy of the ruling party. The constitutional philosophy in this case as laid out in Articles 38 and 39. The effect of benefiting a corporate is to cast a higher tax burden on the common man and when you uphold an illegal tax avoidance, then you cast a higher tax burden on the honest tax payer. According to me the Vodafone judgment has all these implications.

Justice Verma believes the Vodafone judgement is to be clubbed with two other SC judgements- those in the habeas corpus case during the emergency and the JMM bribery case as judgements “which are best forgotten or allowed to pass”. In the habeas corpus case, the SC had ruled that the right to habeas corpus stands suspended during an Emergency- this was subsequently changed by parliament through a constitutional amendment. In the JMM bribery case, the SC ruling was that the MPs who were accused of taking a bribe to vote in a particular way had committed no crime that the legal system could act on as they enjoyed immunity granted to members of parliament.