OAG explains JPLP tax liability

Rebuts that JPLP is liable for Nu 184.90M in taxes

LAW: In its rebuttal to claims made by Jatan Prasad Lalchand Prasad (JPLP), the Office of the Attorney General (OAG) yesterday presented to the Phuentsholing dungkhag court that JPLP is liable to a tax amount of Nu 184.90M.

The defendant, JPLP, had recently submitted and claimed that its actual tax liability amount was Nu 8.69M, and not Nu 184.90M as the OAG had submitted in the proceedings.

JPLP had deployed a Royal Audit Authority-empanelled statutory auditor and determined the new tax liability amount. It was submitted that OAG had included purchase costs in the sales amount to determine tax liability, which they said was wrong.

However, at the hearing yesterday, OAG representatives said that the defendant had not deducted the purchase costs at the time when it was supposed to deduct. The law doesn’t allow deducting purchase costs now.

Section 35.2 of the income tax Act (ITA) 2001 does not allow the deduction after it is missed at the supposed time. “If the law allows, then, there wont be tax evasion,” an OAG representative said.

JPLP legal counsel, meanwhile, said OAG has labeled the purchase costs as “concealed income.” “How can the costs become income?” he said.

As per the ITA 2001, if a business entity does not declare the purchase costs, sales, and the total net income earned from the transactions, the transaction would be considered as evasion. The purchase costs and sales both get considered as net profit on which a 24 percent penalty is then levied.

OAG representatives also said the charges are not against the principle of Double Jeopardy, which JPLP earlier had submitted expressing that defendant was vexed twice for the same offence. A non-applicability of two parallel laws:  the Penal Code of Bhutan and ITA 2001 was pointed out.

Since the alleged offence of the defendant is only tax evasion, which constitutes only a particular act, it should attract only one particular law and not two conflicting laws simultaneously, JPLP had submitted earlier.

The argument was about the defendant being charged for a value-based sentencing under the penal code, which according to the defendant was not contemplated under the ITA 2001.

However, OAG is using ITA 2001 and the penal code 2004, simultaneously. Although ITA 2001 covers fines and penalties in tax evasion, it does not have criminal sanctions. The Act just mentions prosecution and imprisonment.

The penal code, which was enacted in 2004, meanwhile, has included explanation on tax evasion.

JPLP will present its rebuttal on March 22.

Rajesh Rai, Phuentsholing

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