CHAPTER - I

RESEARCH DESIGN & METHODOLOGY

1.1 Introduction :
Any Government gets its revenue for expenditure purpose from three
different sources i.e. income from taxes, income from services rendered
to the general public and various grants and contributions received from
foreign countries and international organizations. Mostly each and every
government collects its major revenue by way of taxes, which is a
compulsory charge imposed by the government without rendering any
service to tax-payer. By taking into account on whom the money burden
of the tax will fall, the taxes are classified into direct tax i.e. taxes on
income received and indirect taxes i.e. taxes on expenditure incurred.
Income-tax i.e. tax on all types of income received by an individual
in a given period comes under the direct tax segment which has proved to
be the major source of revenue to the government of majority of the
countries in the world and an ideal tax from the point of view of equity.
In India, income-tax contributes up to 57.72% to the total revenue of the
central government. It is levied under Income-Tax Act, 1961. The tax
rates change according to financial bill passed by the Central Government
in each year in its budgetary session.
Though income-tax is one of the important sources to the
government finance, it is an evil to tax-payer. Because of compulsion
element, each tax-payer faces the problem of how to find golden means
between minimizing tax liability and maximizing their savings. In this
context, tax consultants who are professionals in the areas help them by
way advising on tax matters as well as finalizing their tax proposals by
charging certain fees in the form of service charges. They also provide

1
some other ancillary services on demand of customers by charging
separately for it.
1.2 Statement of the problem :
Income-tax which is one of the major direct taxes has got much
importance due to rising level of income in the recent years. In last few
decades the number of income-tax consultants as well as income-tax
payers has been increased by many folds. Though the relation between
tax consultants and tax-payers is cordial, there are some difficulties on
both the sides in maintaining cordial relationship. Tax consultants have
formed their associations, which deal with their problems. Tax-payers do
not form such types of associations. They deal with their difficulties on
individual levels. It is seen that the cordial relationship between the two
has been hampering due to these difficulties in recent years. As such, the
researcher decided to study the problem under the title of ‘A Critical
Study of the Services Provided by the Income-Tax Consultants to the
Selected Individual, Firm and Company Assessees in the Sangli-
Miraj-Kupwad Corporation Area.’

1.3 Objectives of the Study:

The present study is undertaken with the following objectives:

To study overall growth of income-tax consultancy as a profession.

To discuss various services provided by tax consultants to the
assessees.

To study the difficulties of the various types of assessees in getting
the services from income-tax consultants.

To discuss the difficulties faced by the tax consultants in providing
consultancy services.

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1.4 Scope of the study :

There are seven types of person prescribed in the Act viz.
individual, partnership firm. Company, association of persons,
local authority, and artificial judicial person. Any person can be
assessee, if he fulfils the terms and conditions as mentioned in the
Act. The scope of the study is limited to the income-tax services
provided by the income-tax consultants to the individual, firm and
company assessees only.

The present study is restricted to Sangli-Miraj-Kupwad corporation
area. Sangli-Miraj are twin cities in Sangli district. Sangli district is
situated in western part of Maharashtra state in India.

1.5 Limitations of the study:

Under the Income-Tax Act, all types of incomes are covered for tax
purpose. Much care has been taken for inclusion of all types of legal
income under its fold. Illegal income if it is detected is also taxed under
the Income-Tax Act, 1961. There is variety of economic activities that
leads to income. It is very difficult to classify them but for study purpose
Researcher has classified these activities under 4 categories viz.
• Business
• Profession
• Employment
• Vocation

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1.6 Hypothesis of the study:
The following hypotheses were framed for the present study:

Hypothesis 1-

H01: The tax consultants face problems while providing consultancy

services to their clients due to unawareness of tax-payers regarding
tax laws and procedures.
H11: The tax-payers are aware about tax laws and procedures.
Hypothesis 2-

H02: The tax consultants face problems while providing consultancy

services to their clients due to improper book-keeping and
documentation by the tax-payers.
H12: There is proper book-keeping and documentation by the tax-payers.
Hypothesis 3-

H03: The tax consultants face problems while providing consultancy

services to their clients regarding electronically filing of returns.
H13:There is no problem regarding electronically filing of returns.
Hypothesis 4-

H04: The assessees face problems while receiving consultancy services

from the tax consultants due to no proper guidance or detailed
explanation by the tax consultants.
H14: Tax consultants provide proper guidance or detailed explanation to
their assessees.
Hypothesis 5-

H05: The assessees face problems while receiving consultancy services

from the tax consultants due to no intimation relating to
amendments, decisions of Supreme Courts by them.

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H15: Tax consultants intimate relating to amendments, decisions of
Supreme Courts to their assessees.

1.7 Methodology Adopted:

The present study is basically an exploratory research. As such, in
order to collect concerned primary data, survey and observation methods
are used. In order to assess the perception of the individual, firm and
company assessees, a separate questionnaire is prepared for each type of
assessees and administered.
This is a descriptive type of research. Therefore simple types of statistical
techniques such as average, percentage etc. are used to analyze the data.

1.8 Sample size:

Multistage sampling framework is used in the survey design.
Sample size is determined in three stages.

In the first stage, ‘Sangli-Miraj-Kupwad Corporation Area’ to

which the researcher belongs has been selected as the area of study. The
area is decided from the name of Municipal Corporation governing in
Sangli district in Maharashtra State of India.

In the second stage it is decided to use stratified random sampling

method as the total population includes two types of strata viz., income-
tax consultants and assessees. There are approximately 300 income-tax
consultants in the selected area. Researcher has decided to select 10% of
them under stratified random sampling method for study purpose. These
income-tax consultants are mainly classified into two categories i.e. tax
consultants having qualification ‘chartered accountant’ and tax

5
 consultants having qualification ‘other than chartered accountant’. 50-
50% income-tax consultants are selected from both the categories.

In the last stage researcher has selected the assessees (individuals,

partnership firms and companies) for the study purpose. The selected
30 income-tax consultants in all having near about 10000 assessees as
their clients. Out of them near about 8000 assessees are from Sangli-
Miraj-Kupwad corporation area. And out of these 8000 assessees 7300
assessees are of selected type of assessees i.e. individual, partnership
firm and company assessees. Classification of these assessees is as
under:
Table No.1.1
Sample Size of Assessees
Sr. Type of Actual No. of Assessees selected
No. Assessees Assessees No. of Percentage
Assessees
1. Individual 6000 300 5%
2. Partnership Firm 1000 50 5%
3. Company 300 30 10%
Total 7300 380

Out of total population 5% individual assessees, 5% partnership

firms and 10% company assessees are randomly selected for the study
purpose. Due care is taken while selecting the samples that they represent
the variations in the strata.

1.9 Data collection :

Survey method of research is used for the present study. The data
is collected by using primary & secondary sources.

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a. Primary Data –
Primary data is collected by using questionnaire and observation.
Formal and informal discussions are also held with the officers of
Department of Income-Tax.
i) Questionnaire –
Primary data is collected by administering questionnaire to the
income-tax consultants as well as to the tax-payers i.e. individual,
partnership firm & company assessees in the area. For the purpose
four separate questionnaires for tax consultants, individual, firm
and company assessees are prepared and administered.
Questionnaires are prepared by keeping in view the main
objectives of the research. While preparing the questionnaires,
proper care has been taken with regard to the different elements
which play a major role in the service industry, especially in
income-tax consultancy.
ii) Observations:-
In order to have an unbiased data with regard to all the
aspects of the study, the researcher prepared an observation
schedule pertaining to each & every aspect contained in the
questionnaire. With this observation schedule, personal visits are
arranged to income-tax consultants as well as individual, firm &
company assessees in Sangli-Miraj-Kupwad corporation area. The
observation is earmarked accordingly.
iii) Formal & informal discussion :-
The authorities directly & indirectly related with income-tax
consultancy services as well as assessees under study are contacted
& formal & informal discussions are held with them.

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 b. Secondary Data
For the study purpose the required secondary data is collected
by using various published sources. The data regarding tax
collection, number of assessees etc. is collected by visiting various
Income-Tax Offices at Kolhapur and Sangli. Some government
publications are also used for national and state level information.
General taxation information is collected from various types of
office records, committee reports and articles and books published
on the issue.
Information related to Institute of Chartered Accountants of
India, Association of Tax Practitioners, Income-Tax Department of
India etc. has been collected through the internet surfing. For
historical development of tax consultancy profession in the study
area, the data provided and published by associations of the
professionals are used.
1.10 Data processing:
For the presentation and study purpose, the collected data is edited,
classified, and tabulated by using usual statistical techniques. The
graphical representation of the data is also given wherever necessary.
The classified and tabulated data is analyzed and studied by using
the techniques such as percentage, averages, means; graphical implication
etc. The collected data is interpreted and the conclusions are drawn. Even
the suggestions also provided.

1.11 Chapter Scheme:

The study is divided into following chapters-
I) Chapter-I includes introduction, objectives, scope and
limitations of the study and research methodology used etc.

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 This chapter also includes the review of literature regarding
income-tax consultancy services.
II) Chapter-II deals with development and administration of
income-tax in India. It covers historical review of income-tax,
income-tax rates, tax revenue of the Government and income-
tax administration.
III) Chapter-III deals with conceptual study of income-tax
consultancy services. It includes theoretical concept of
‘service’, ‘consultancy services’ and ‘income-tax consultancy
services’. It also includes international and Indian scenario of
service sector.
IV) Chapter-IV includes profile of Sangli district and overall growth
of income-tax consultancy profession in Sangli-Miraj-Kupwad
corporation area.
V) Chapter-V presents and interprets the data collected and
analyses it.
VI) Chapter-VI includes conclusions drawn and necessary
suggestions offered.

1.12 Review of Related Literature:

The following published and unpublished literature related to the
research study proved extremely valuable.

Ph.D Theses

a. Eranna M. in his thesis entitled as ‘Evaluation of Tax

Administration Machinery under the Income-Tax Act, 1961’ has
studied the areas of weaknesses in the existing tax administration
machinery and had suggested that the Income-Tax Department is a
highly human interactive department of the Government, so it may

9
 consider organizing city, regional and national level training courses
for its personnel at different administrative hierarchy to impart them in
human relations skills.
He further stated that the Income-Tax Act, 1961, is the modified
version of its predecessor 1922 Act, the language is trapped in a
typical legal verbiage and the tax collectors as well as tax-payers are
fated to abide by it. The numerous income-tax handbooks published
by private individuals also reflect the same overtones and hence, are
understood only by the tax practitioners’ fraternity. The least the
department can do is to publish authoritative ‘Income-Tax
Manuals in the regional languages for the use of the ordinary tax-
payers. The aim should be ‘tax educating’ the smallest tax-payers
so that his route to the Income-Tax office does not have to go
through a tax practitioners’ office.

b. P.G.Kulkarni has studied the significance of the overall direct tax

structure in Indian economy in his thesis entitled 'Evaluation of Law,
Practice and Administration of Union Direct Taxes in India'. He
has examined the evaluation of various direct tax laws in India, along
with their amendments made from time to time together with a review
of the major recommendations and findings of various committees,
commissions, appointed by the Union Government from time to time,
in connection with direct taxes in India, wherever necessary.
He has also presented and justified views related to the drawbacks
and loopholes in the administrative practices of direct tax laws,
inclusive of conceptual confusion based on an experience – survey,
with the aid of certain parameters.
He recommended the need to totally reframe the overall tax
structure, which should, in the first instance, essentially attain the

10
 economic objectives of taxation through legal channels and in the
second, provide stable, certain, simple legal structure and in the final,
gives an impetus to the entire economy of the nation.

M.Phil Dissertations:
a. Desai G.D., in her dissertation entitled ‘A Review of Direct Tax
Reforms in India’ has took a stock of the reforms initiated by the
Government from time to time and examined and evaluated the
achievements in this area. Thereafter suggested to deviate from the
normative concept of taxing incomes to presumptive tax system so as
to attract new tax-payers into the tax net.
b. Dharmadhikari M. R. in her dissertation entitled ‘Procedure for
Collection and Recovery of Taxes under Income-Tax Act, 1961’,
has critically examined the statutory provisions under the Income-Tax
Act, 1961, relating to the collection and recovery of tax and the
relevant case-law in respect of the collection and recovery of tax. She
has recommended to simplify the design of tax instruments, with
fewer taxes and fewer adjustments to the base as well as to strengthen
tax administration to improve collection and facilitate the shift in the
tax structure from reliance on higher tax rates to reliance on broader
tax base and to avoid taxing the poor.
c. Kaddipudi Mallikarjuna N., in his dissertation entitled ‘Direct Tax
Contribution and its Role in the Union Financial Structure' has
studied the contribution and role of Direct Tax in the Union Finance
Structure.
d. Mane R.M. in his dissertation entitled ‘A critical study of
Assessment Procedure under the Income-Tax Act, 1961’ has
studied the amendments made in the provisions regarding the

11
 procedure for assessment. He also studied, whether the assessments
are pending due to complex assessment procedure.
e. More A. N. in his dissertation entitled 'Procedure for Appeals and
Revisions under the Income-Tax Law' has critically examined the
existing provisions for appeals and revisions in the Income-Tax Act,
1961 and evaluated the procedure laid down under the Income-Tax
Act for appeals and revisions. He had suggested that the entire
procedure for setting up of the Appellate Tribunal needs to be re-
evaluated, particularly with reference to the constitution and
composition of the Tribunal. He further pointed out that in order to
introduce such innovations, the basic tax law itself should be
simplified and streamlined and the administrative machinery
strengthened.
f. Panduranga H in his thesis entitled ‘Corporate Tax Structure
under Direct Tax Laws- A Critical Evaluation’ has reviewed the
fiscal measures of the Government with regard to corporate sector
taxation. He also discussed whether the corporate sector in India is
over taxed as compared with its counterparts in the advanced countries
like U.S.A. and U.K. He suggested that there exists an immediate need
for simplifying the corporate tax system.
g. Patil M.B. has studied critically ‘The significance of Income under
the Income-Tax Act, 1961’ and recommended that for the purpose of
generally maximizing the scope of mobilization of the revenue,
introduction of expenditure tax would be of great significance as this
itself would assist the exchequer in expanding the tax base and in
generating tax revenue.

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Articles

a. Ray Alok in his article ‘Professional Indemnity Insurance - A

Capacity Building Measure’ discusses the Consumer Protection Act,
1986 and definitions of service given in it and deficiency of service.
He particularly discusses the deficiency of services which includes
any fault, imperfection, short coming or inadequate in the quality,
nature and manner of performance, in the pursuance of a contract in
relation to any service and the legal protection to clients under various
laws and the professional indemnity arise to it. He also depicts how
professional insurance helps in it and use of it to such profession.
b. Santhana Kumar S. in his article ‘Professional Opportunities for
C.A.s in Information Technology Sector’ discusses the role of C. A. in
financial reporting, taxation, quality of service, web-based and web
enabled applications, communication and band width quality of IT
personnel etc. He further discusses the primary concerns of such
consultants in information security, emerging standards, e-governance
and the role of C.A.s in system development life cycle etc. and
suggests that he can provide services in selection of packaged software
for small and medium sized clients.
c. Verma D.P.S. and Jain Indu in their article ‘Growth in Income-Tax
Base : A Comparison of Development and Developing countries’
they discussed the base of the income-tax structure as a factor of the
tax revenue, the rate of income-tax, number of tax-payers of the
country as compared to the total population of the country, the ratio of
individual tax-payers to total population, income-tax revenue and
Gross Domestic Product, income-tax revenue to total tax revenue, per
capita is very low in developing countries like India, Pakistan etc. and

13
 does not show much increase in percentage term and requires
sufficient improvement in per capita tax revenue.

Books
a. Harjeet Kaur, in her book ‘Taxation and Development Finance in
India’ has attempted to analyze the changes in the tax structure under
the impact of its role as an instrument. She has also attempted to
analyze the impact of tax-structure on the volume of aggregate saving
as well as different components of savings.
b. The book ‘Services Marketing’ by Jha S.M., substantially
contributes to the mainstream of knowledge on the different frontiers
of services marketing which attends to almost all the vital facets of the
emerging trends with clarity and perspicacity. The book covers a
number of services, viz. bank, insurance, transport, tourism, hotel,
consultancy, education, hospital, personal care, courier,
entertainment, telecommunication, electricity and automobile services.
c. Lakhotia Ram Niwas, in his book, ‘Elements of Indian Income-
Tax’ which is also basically a text book for B.Com. and LL.B.
students of Indian Universities, has tried to simplify the Income Tax
Act, 1961. This eighteenth edition is based on amendments made by
Finance Act, 1974.
d. Mehrotra H.C., in his book ‘Income-Tax Law and Accounts’ which
is basically a text book for B.Com. and LL.B. students of Indian
Universities, has explained the Income-Tax Act, 1961 in a simple
manner. His book is based on amendments made by Finance Act,
1969.
e. Nargundkar Rajendra, in his book ‘Services Marketing – Text and
Cases (Second Edition)’ has examined all the aspects of services
marketing in the Indian / Asian setting. He began with the S-T-P

14
 process (segmentation- targeting- positioning) goes to integrate them
into a total services marketing strategy mix for leaders, challengers,
followers and niche marketers. His book is enriched with lot of
contextual materials like case studies; mini cases boxed items and
readings.
f. Ravi Shankar, in his book, ‘Services Marketing – the indian
perspective’, has discussed the phenomenon of services, its role in the
economy, characteristics and Marketing Implications. In addition to
traditional marketing mix in services, he explained extended
marketing mix in services. He has also discussed about services
quality and services strategies.
g. ‘Services Marketing – The Indian context’ by R. Srinivasan
provides a detailed discussion of such topics as the concept of
services, consumer decision process and ethical issues, pricing,
consumer satisfaction and customer retention. Besides, separate
chapters are devoted to a comprehensive analysis of financial services,
information technology services and health care services. His book
gives a clear and straight forward analysis of Services Marketing.
h. Venugopal Vasanti and Raghu V.N. in their book ‘Services
Marketing’ have recognized the growing importance of services and
the unique challenges faced by service managers.
i. Vinay Kumar, in his book ‘Tax system in India and Role of Income-
Tax’ has given brief review of the Indian Tax System. He has
discussed Scheme of Taxation of income in India. He also discussed
administration of income-tax in India as well as tax avoidance and tax
planning. Further he explained appraisal of enforcement of income –
tax measures in India.

15
1.13 Conclusion:
Income-tax is the main source of revenue to any government. In
India income-tax is levied and collected as per the rules, regulations
and provisions of ‘Income-Tax Act, 1961’. This Act has its own
history. In 1922 the All India Income-Tax Committee recommended
and passed the Indian Income-Tax Act, 1922, which was built on
‘British Model’. Though the current ‘Income-Tax Act, 1961’ has been
came into existence after modifying ‘The Indian Income-Tax Act,
1922’, the impact of British Model is still exists on the Act. Due to
this impact the Act is not so familiar to the common man of India.
Kulkarni P.G., in his Ph.D. thesis mentioned that there is a need to
totally reframe the overall tax structure. Eranna M. also in his Ph.D.
thesis stated that the language of the Act and other income-tax hand-
books is trapped in a typical legal verbiage, which is very difficult to
understand.
Eranna M. in his thesis suggested that the Income-Tax Department
is a highly human interactive department of the Government, so it may
consider organizing city, regional and national level training courses
for its personnel at different administrative hierarchy to impart them in
human relations skills. But it is not sufficient. Tax-educating the
assessees is equally necessary. For that purpose Income-Tax
Department have to arrange workshops, seminars and training courses
for assessees too. Department may take help of television channels for
tax-educating the people. Interest regarding income-tax should be
created among people. People of India must be tax aware and tax-
educated.
Now-a-days there is remarkable increase in number of
assessees. Majority of assessees are unable to comply the tax
procedure as required by the Act. This is the reason for emergence of

16
tax consultancy services. Tax consultants provide services to the
clients like, consulting or advising on tax matters, calculating tax of
the assessees and filing returns on behalf of them. According to
amendments made to Act assessees demanded other services like
book-keeping, auditing, cost accounting, management accounting etc.
from their tax consultants. The scope of services provided by tax
consultants has been increasing gradually. S. Sanath kumar in his
article ‘ Professional Opportunities for Chartered Accountants in
Information Technology Sector’ discussed the role of C. A. in
financial reporting, taxation, quality of service, web-based and web
enabled applications, communication and band width quality of IT
personnel etc. He also discussed the primary concerns of such
consultants in information security, emerging standards, e-governance
and the role of C.A.s in system development life cycle etc. and
suggested that he can provide services in selection of packaged
software for small and medium sized clients.
There is plenty of literature available on income-tax, Income-Tax
Act, Government policies regarding income-tax, various amendments
to Income-Tax Act, tax evasion and tax avoidance etc., but no efforts
have been made to analyze the services provided by income-tax
consultants to their assessees or to analyze the relation between
income-tax consultants and their assessees (clients).
The dimension of a critical study of services provided by income-
tax consultants to their individual, partnership firm and company
assessees in Sangli-Miraj-Kupwad Corporation Area is not covered by
any of the researcher. This study is designed to analyze the difficulties
faced by income-tax consultants while providing services to their
assessees as well as the difficulties faced by the assessees while
getting services from their income-tax consultants.

17
REFERENCES:

Ph.D Theses:
a. Eranna M. (2002), Evaluation of Tax Administration Machinery
under the Income-Tax Act, 1961, Ph.D. thesis submitted to Shivaji
University, Kolhapur.
b. Kulkarni P.G. (1990), Evaluation of Law, Practice and
Administration of Union Direct Taxes in India, Ph.D. thesis
submitted to Chh. Shahu Institute of Business Education Research.

M.Phil Dissertations:
a. Desai G. D. (1992-93), A Review of Direct Tax Reforms in India
b. Dharmadhikari M. R. (1991), Procedure for Collection and
Recovery of Taxes under Income-Tax Act, 1961
c. Kaddipudi Mallikarjuna N. (1993), Direct Tax Contribution and its
role in the Union Financial Structure
d. Mane R.M. (1990), A critical study of Assessment Procedure under
the Income-Tax Act, 1961
e. More A. N. (1991-92), Procedure for Appeals and Revisions under
the Income-Tax Law
f. Panduranga H (1993), Corporate Tax Structure under Direct Tax
Laws- A Critical Evaluation
g. Patil M.B. (1992), The significance of Income under the Income-
Tax Act, 1961

Articles
a. Ray Alok, Professional Indemnity Insurance - A Capacity Building
Measure published in ‘The Chartered Accountant’, volume 56, No.
4, October 2007.

18
 b. Santhana Kumar S, Professional Opportunities for C.A.s in
Information Technology Sector published in ‘The Chartered
Accountant’, volume 52, No. 2, August 2003.
c. Verma D.P.S. and Jain Indu, Growth in Income-Tax Base: A
Comparison of Development and Developing countries’ published
in ‘The Chartered Accountant’, volume 51, No. 1, July 2002.

Books
a. Harjeet Kaur (1992), Taxation and Development Finance in India,
Classical Publishing Company, New Delhi.
b. Jha S.M. (2009), Services Marketing, Himalaya Publishing House,
Mumbai.
c. Lakhotia Ram Niwas (1974), Elements of Indian Income-Tax, Asha
Publishing House, Calcutta-19.
d. Mehrotra H.C. (1969), Income-Tax Law and Accounts, Sahitya
Bhawan, Agra-3
e. Nargundkar Rajendra (2009), Services Marketing – Text and Cases
(Second Edition), Tata McGraw-Hill Publishing Company Ltd.,
New Delhi.
f. Ravi Shankar (2002), Services Marketing – the indian perspective,
Excel Books, New Delhi.
g. Srinivasan R. (2006), Services Marketing – The Indian context,
Prentice Hall of India Pvt. Ltd., New Delhi.
h. Venugopal Vasanti and Raghu V.N. (2006), Services Marketing,
Himalaya Publishing House, Mumbai.
i. Vinay Kumar (1988), Tax system in India and Role of Income-Tax,
Deep and Deep Publications, New Delhi.

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