The parliamentary Finance Committee on Monday directed the government to initiate process to annul the Tax Settlement Commission (TSC) Act 1976.

The directive comes amid an investigation by the Commission for Investigation of Abuse of Authority (CIAA) into tax exemption given to various enterprises by the TSC in a dubious way.

The CIAA filed a graft case against TSC Chairman Lumba Dhwoj Mahat, member Umesh Dhakal and member secretary Chudamani Sharma on Sunday at the Special Court, charging each with embezzling Rs 10.2 billion while settling taxes of around 45 companies. 

The TSC was formed in 2015 during the Sushil Koriala-led government as per the TSC Act 1976, which was already outdated after the introduction of Income Tax Act in 2002. The TSC Act was introduced in 1976 to collect due tax amount, mainly from the sick industries which were unable to clear their due amount so as to help them revive.

In the last four decades since the TSC Act was introduced, the government has formed 13 commissions for settling taxes, and the recent one was formed in 2015. The three-member TSC was mandated to recover Rs 40 billion tax from various enterprises.  But the commission ran into controversy after a report of the Office of the Auditor General in April called into question Rs 21-billion tax exemption granted to various companies by the TSC. “The parliamentary committee has asked the government to scrap the TSC Act,” said Prakash Jwala, chairman of the Finance Committee of Parliament.

Earlier, Public Accounts Committee of Parliament had also directed the government not to form any commission with a view to settling taxes.

Former revenue secretary Rameshwore Khanal said he, on behalf of the Finance Ministry, had signed on a minute of the parliamentary committee decision. However, neither the parliamentary committee nor the government bodies seem to know the whereabouts of the minute.

Meanwhile, the parliamentary committee has formed a nine member sub-committee to study the possible evasion of government revenue and irregularities in tax collection.