#BombaySeniors: In conversation with tax expert, senior counsel V Sridharan

For someone considered to be one of the biggest names in tax law, V Sridharan is remarkably devoid of any airs. A co-founder of the tax firm Lakshmikumaran & Sridharan, he completed a bachelors degree in mathematics before eventually landing up in law..Designated in 2011 by the Bombay High Court, Sridharan shares his journey from a middle-class family in Madras, building a tax practice, and the challenges he faced along the way..Anuj Agrawal: You completed a bachelors in mathematics before moving on to chartered accountancy, and then law. Was the BSc because you wanted to teach? .V Sridharan: Oh no, we never had those concepts those days. We were from an extremely humble family so we don’t know what is what. We just did whatever came by; there was no desire or plan, no career choices as such..I was never really a topper as such but did come rank two or three. I tried for engineering but I didn’t get through. In those days, some of the admission procedures in engineering colleges was not very transparent and proper..So even though I made the marks, I did not get the course. Therefore I joined mathematics and did reasonably well. After that, I did accountancy..When I got done with accountancy, I developed interest in tax subject and therefore I joined Mr. Chandrasekharan, a senior counsel in Delhi. He was a very nice man..Anuj Agrawal: You completed your law in Delhi. .V Sridharan: Yes, I did law in Delhi. My brother got transferred to Delhi because he was engaged with the Indian Revenue Service, and was posted in Delhi at the time..Anuj Agrawal: Was there a cultural shock moving to Delhi?.V Sridharan: No, not if you are just about struggling to do what you are supposed to do. I mean I never had any other interest of anything; so I just wanted to complete my course..Incidentally when I went to Delhi, a boy introduced himself and asked me which school I was from. So I told him I was from such and such corporation school in Madras. He said he was from Doon School. At that time I did not even know what Doon school was! One year down the line, when the CA inter exams took place, I got through. The Doon School boys took some more time..Anuj Agrawal: When did you join Mr. Chandrashekhar?.V Sridharan: I joined him in 1984, and was with him for about a year and a half, then he shifted his residence to a far away location. At that time my brother, had resigned from his job. For an extremely middle class South Indian family, resignation was a big thing..Our main aim then was getting a house on rent. Fortunately my sister-in-law got a job in TERI. So they gave us an HRA of three thousand rupees or so..Anuj Agrawal: So that is when you decided to go independent?.V Sridharan: In 1985, we found this place, a room as big as this (points to the small room we are sitting in). It had one table and a chair. If my brother was meeting a client, I would sit in my bedroom and work. Initially we only did excise, because that was what my brother excelled at..It had one table and a chair. If my brother was meeting a client, I would sit in my bedroom and work..Those days all classifications and valuations matters from all over the country, would only be heard in Delhi. So we had a natural advantage..The clients came, it is all Gods grace really. In 1986 the Central Excise Act was replaced by the new Tariff Act and all the matters came to Delhi..Anuj Agrawal: How did you start building the office?.V Sridharan: In 1985 two of us started, and then Madhav Rao, who was with us for a good 30 years, joined us. Another one, who is a principal partner now, Mr. Vishwanathan, also joined us. The four of us would work together..I had argued my first case in 1986 or so, when I was twenty-six years old. The advantage I had was I did not know what was success or failure. We didn’t know if we did this we would fail or succeed..Anuj Agrawal: Are you surprised looking back? When did the expansion start? .V Sridharan: This whole planning bit started in 1995. But before that, we used to be sincere in our dealings, and perhaps low-cost. Also, matters were not extremely complex..We are from a village where we are used to memorising things. In the temple, we were taught shlokas. By the time I finished my CA I could reproduce verbatim the Contract Act (S 2-75), the Sales of Goods Act, the Partnership Act, up to 205 sections of the Companies Act and 80 sections or so of the Income Tax Act..We didn’t have money to buy commentaries. Someone lent us the bare acts, so we memorised them..Anuj Agrawal: How was the Tax Bar at that time? .V Sridharan: By about 1991 we had plenty of work. In 1995 we got one lucky break. Justice UL Bhat, the former Chief Justice of Madhya Pradesh, was the President of the tax tribunal..A brilliant man, extremely well organised but with a very sharp tongue. He told me that I was very good at my job but I would jump from point to point. I constantly appeared before a judge who was very tough but fair. He gave you the next level of sharpening that one required..Anuj Agrawal: So when did you make the shift to Bombay?.V Sridharan: Somewhere around 1999-2000 or so, the Central Excise Act was amended to say that benches in Bombay and Madras would also hear the classification and valuation matters..Initially, we would travel three times a week at times. Then three of us – Nambirajan, Vishwanathan and I shifted to Bombay. Unlike other firms where the partner would have stayed in the Oberoi for four months, we all stayed in a small space. They made some great sacrifices..Anuj Agrawal: As an arguing counsel do you find it difficult to enter the Bombay Bar?.V Sridharan: Absolutely not. Bombay is excellent place to work. There is absolutely no problem if you are an outsider; nobody bothers you. It would have been much tougher, whatever be the reason, if we started in Madras..Anuj Agrawal: In 2011 you were designated..V Sridharan: We had a judge, Justice Rebello who insisted I apply. Eventually I was designated and then I resigned from the firm. Naturally, I cannot be and I am not a Partner at the firm..Anuj Agrawal: What is your view of the senior designation?.V Sridharan: There’s nothing wrong in the system but according to me it needs to be implemented properly. I mean there are justifiable cases where you find that a person should be designated earlier..But sometimes the judges of the court may also have their compulsions. They may believe that some from the government advocates side should be designated, some labour lawyer should also be designated etc. .Anuj Agrawal: If someone wants to start a tax practice, what advice would you give?.V Sridharan: Firstly, don’t try and do all tax matters. Initially it is not possible. Take up one of the taxes and do that well for 5-10 years. Earn some revenue for yourself, and then start looking at the other branches..Secondly, take up some of the old books on tax laws; don’t read the current books. Some of the old books lay down some principles so beautifully and lucidly. Those core fundamental principles – they will never change..Those days, lawyers were extremely learned, they were not as commercialized as we are. The judges had more time to deliver the judgments. Judges today are pressurized with the volume of work, they just don’t have the luxury of devoting time, but still they do a good job..Plus, you must memorise the bare act. The moment you know the Act by heart, you can solve 90% of the problems. I am not saying you should know all the sections, but the important ones, the core sections you should know..Lastly, particularly for tax laws in India, all sections have a history. You must know where the sections started and why it is in this shape now. Once you know that, it is very easy..Anuj Agrawal: How do you think tax litigation can be reduced?.V Sridharan: I may be wrong, but my perception is that majority of the problems are because of poor legislation. The drafting skills have become pathetic. Every time there is some patchwork that is done, and this is not good for the country..This is my humble opinion, and I hope I’m wrong, but there seems to be a virtual war between the Income Tax Department and the citizens of this country. This is not good..“There seems to be a virtual war between the Income Tax Department and the citizens of this country. This is not good.”.It appears as if they’re our adversaries. Ordinary citizens of this country are harassed a lot, and the crooks get away whatever be the reason for this..Anuj Agrawal: Service tax on lawyers- What is your take on this?.V Sridharan: Legally, it is perfectly valid, constitutionally it is perfectly valid. The world over, lawyers pay GST. Constitutionally, the government is not barred from levying it. Our High Court has already upheld the levy..The only point which they feel is, we will be liable to pay service tax on amounts not realised. That is when clients do not pay the fees. In income tax, we pay only on what we collect. There is some merit there..But from the government’s point of view, they say that everyone pays sales tax whether debt is bad or not, same in customs. So there is some merit in what the government says as well. But since we are used to cash-based accounting, it is a big challenge. That is the sole point..I have told lawyers that even if we get a stay, let us not get carried away with it. Tomorrow, if the tax is held to be valid, we will be liable to pay with retrospective effect..The perception that all senior advocates have a reasonably good practice is also incorrect. In mofussil towns, the truth is that there are senior advocates who do not have large establishments..Even in Delhi there are a large number of senior advocates who have modest revenues – to make them pay when the client does not pay is a problem..But that is always a problem in tax matters..Anuj Agrawal: Thoughts on the equalization levy on e-commerce?.V Sridharan: This is not a problem in India, equalisation levy is a global problem and is one of the methods suggested by the OECD..For instance, if Roger Federer comes to India for a week and plays a tournament, and earns a million dollars, he has to pay tax income tax in the source country. The principle is that the society is able to afford you. Therefore the real source is not where you stay and practice – this is the justification for source-based taxation..The traditional definition of PE (permanent establishment) that you have to operate from a fixed place is no longer relevant. Therefore the OECD recommends that the model of “office” and “branch” which was developed in the early 20th century is ill- suited to deal with these modern transactions..Anuj Agrawal: What about retrospective applicability of taxes?.V Sridharan: To say one will never retrospectively tax is also too much of a mistake. There are cases where one must do retrospective applicability. Our courts sometimes come up with an interpretation, which is totally different from what the government thought, sometimes favoring the assesse and sometimes against the assesse..To say every retrospective amendment is unnecessary is incorrect. What you may say is, where the law was extremely clear, but different from our understanding, it is unfair to introduce retrospective applicability..Anuj Agrawal: From your perspective, from your clients what is their reading of the tax climate in India?.V Sridharan: The greater problem to me is the over anxiety and ingenuity of our tax officers, when they clearly know that this was not the intention of the Government..The greater problem to me is the over anxiety and ingenuity of our tax officers, when they clearly know that this was not the intention of the Government..When they clearly know there’s a mistake in the legislature, they say that they are the implementing authority, and not concerned with a mistake in the legislation..Take the MakeMyTrip case where the official was arrested – clearly, that was never the intention of the legislation. Those are the cases that really upset me.