Live
mint: Mumbai: Wednesday, 10 December 2014.
The Delhi
high court in a recent order said that tax information of private limited
companies is confidential data and exempt from disclosure under the Right To
Information (RTI) Act. Currently, individuals are exempt from such disclosure,
and the ruling extends the definition of individual in this context to private
firms as well.
A private
limited company has a minimum paid-up share capital of Rs.1 lakh, 2-50
shareholders, and has limited liability. It cannot sell shares to the public
nor transfer them freely between shareholders.
“The
expression individual must be construed in an expansive sense and would include
a body of individuals. The said exemption would be available even to
unincorporated entities as also private, closely-held undertakings which are,
in substance, alter egos of their shareholders,” said a 24 November order by
justice Vibhu Bakhru. The court said confidential information of individuals
cannot be disclosed unless it is in public interest.
The court was
hearing an appeal filed by Escorts Ltd, Escorts Heart Institute and Research
Centre and their promoters Naresh Trehan and Rajan Nanda, against a 2009
Central Information Commission (CIC) ruling that allowed disclosure of their
income-tax assessment records under RTI.
CIC had ruled
that the Escorts Group had failed to explain “how disclosure of information
relating to commercial confidence would harm their competitive interest”.
CIC’s order
was in response to a request made by Rakesh Gupta, an informer of the
income-tax department. Gupta had alleged tax evasion of over Rs.350 crore by
the Escorts Group and sought tax records of the group and its promoters in
public interest.
The Delhi
high court, however, said CIC was wrong to ask tax authorities to disclose
information to informers to enable them to bring instances of tax evasion to
the notice of authorities.
“In my view,
this reasoning is flawed as it would tend to subvert the assessment process
rather than aid it. If this idea is carried to its logical end, it would enable
several busy bodies to interfere in assessment proceedings and throw up their
interpretation of law and facts as to how an assessment ought to be carried
out. The propensity of this to multiply litigation cannot be underestimated,”
said justice Bakhru in the high court order.
Welcoming the
judgement, S. Ramaswamy, executive vice-president and group general counsel of
Escorts Ltd, one of the petitioners, said the high court had found “no
discriminable element of larger public interest” to disclose tax information.
Satyananda
Mishra, retired IAS officer and former chief information commissioner, said,
“The Delhi high court has restored the correct order. Information provided by
an individual in his I-T returns is exempt from disclosure under RTI.”
According to
Amit Maheshwari, partner, Ashok Maheshwary & Associates, seeking
information on tax return of individuals and unincorporated assessee is an
invasion of privacy as the information pertaining to their income and
expenditure is not in public domain.
“The same
holds true for the private limited companies as well, since their profit and loss
are not available for public inspection. These companies are usually an
extension of the promoters,” said Maheshwari.
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