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

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. (Live Mint)