This is the continuation of the discussions on the proposed amendments to ITA 2008 being considered by the T K Vishwanathan Committee.. Naavi
The proposed amendments to ITA 2000/8 which may come out in the form of Information Technology Amendment Act 2017 [ (ITAA2017(p)] during this year is an opportunity to make substantial changes to the present Act.
One of the main sections which needs attention in redefining the scope of the Act is to take a fresh look at Section 1(4) which keeps certain types of documents as mentioned in Schedule(1) out of the provisions of the Act. In the recent past there have been many State level enactments where legislations have been passed ultravires to the main Act because this section was not properly understood. Karnataka was one such state which passed an amendment to Registration Act 1908 which may be considered as ultravires the ITA 2000 because of Section 1(4) limitations.
Presently, Section 1(4) states as follows:
“Nothing in this Act shall apply to documents or transactions specified in the First Schedule by way of addition or deletion of entries thereto.”
The excluded documents so far notified are
1. A Negotiable Instrument (Other than a cheque) as defined in Section 13 of the Negotiable Instruments Act 1881 (26 of 1881)
2. A Power of Attorney as defined in section 1A of the Power of Attorney Act 1882 (7 of 1882)
3. A trust as defined in section 3 of the Indian Trusts Act, 1882 (2 of 1882)
4. A will as defined in clause (h) of section 2 of the Indian Succession Act, 1925 (39 of 1925) including any testamentary deposition whatever name called
5. Any contract for the sale or conveyance of immovable property or any interest in such property
The reasons for which these documents might have been kept out of the purview of the Act at that time (1998) could be either that some of these documents such as the Bill of Exchange and Promissory Notes needed to be compulsorily stamped before execution and it was difficult to do an online stamp and also establish that stamp duty was paid before the authentication and hence it was kept out of the purview.
The immovable property documents that transferred the title in the property constituted a huge part of the stamp duty income which accrued to the States and additionally there was a doubt if digital documents can be preserved for as long a time as paper documents could be preserved and hence needed to be kept out of the purview.
The other documents such as Trust Deed, Power of Attorney and Will were kept out perhaps keeping in view the “Digital Divide” and possibility of common men being duped with online frauds involving such documents.
The concerns of “Cyber Crime” involving property documents or Wills or Power of Attorney documents continue to this day and are perhaps more relevant than ever before though payment of stamp duty online is an easier problem that is no longer a concern.
Storage of electronic documents might be considered more reliable today than before. Further it would be strengthened if proper “E-Audit” under Section 7A of the Act is followed diligently.
Despite the changes that has come across in the last 18-19 years since the Schedule 1 content was drafted (first as part of Section 1 and then under Schedule 1), it is time to consider if at least some of these provisions could be addressed now.
Unfortunately the system of Authentication defined by Digital Signature and Electronic Signature itself is shaky because the system is not properly implemented. Presently the system is running because the users are unaware of the proper way of using the digital/electronic signatures and intermediaries including the licensed Certifying Authorities by pass many of the legal provisions and CCA is not enforcing its authority.
For example, today private keys are being compromised systematically by corporate directors leaving the cryptographic keys with their auditors. Many of the Certifying authorities engage Registration Authorities (RAs) who keep copies of the private key with them, load it onto the cryptographic key and then deliver it to the customers ignoring the fact that the private key has been compromised.
The e-sign system itself is faulty for the reason that the key pair might be generated and stored on the HSM controlled by an RA and not the subscriber and that the subscriber’s e-application for issue of digital certificate is itself not authenticated since the subscriber has not yet obtained the digital certificate at this point of time. The e-KYC of aadhaar is done with reference to the OTP relying on the KYC of the Mobile operator and the digital certificate expires before the first verification of the e-signed application is made.
In view of these fault lines in the authentication systems, it may not yet be possible to remove either the immovable property documents or the Will or Power of Attorney from the list of excluded documents.
However, if there is any conditional inclusions can be made, property lease deeds of less than one year duration which may presently be exempted from stamp duty can be included in the act.
As regards the “Will” there are two issues. A Will can be left for properties which are not digital. At the same time a Will may also include properties which are per-se digital such as the e-mail accounts, domain names, websites etc.
It can be considered if a testamentary document in electronic form could be recognized only for the digital properties such as the “Passwords”, “e-mail accounts”, “Digi locker/Drop box accounts”, Apps on the mobile including UPI apps and Mobile wallets holding monetary value, Cryptocurrency wallets, Software purchased and running online, Mobile accounts, SIM card/Stored on the Mobile information, domain names, websites, content and web based software etc.
Additionally, I have suggested that “Contracts of Marriages” including “Contracts to nullify Marriages” can be added as an exclusion. This will address the issue of nuisance “Claimed Marriages on Twitter” or “Talaq on WhatsApp”.
A more detailed debate on this issue may throw up other suggestions if any.
Thus the scope of ITA 2017 (P) needs to be redefined with reference to the type of documents that it may cover either by modifying the First Schedule of the Act or by inserting new definitions and explanations at appropriate places.