Centre introduces bill to scrap retrospective tax law – Times of India
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NEW DELHI: The finance ministry on Thursday introduced Taxation Laws (Amendment) Bill, 2021 in Lok Sabha to do away with the contentious retrospective tax demand provisions.
The retro tax provision was introduced by the UPA government in Finance Act 2012. The purpose was to impose tax on capital gains made by companies like Cairn Energy Plc and Vodafone Group of UK retrospectively.
As per the amendment, tax raised for the indirect transfer of Indian assets before May 2012 would be “nullified on fulfillment of specified conditions” such as the withdrawal of pending litigation and an undertaking that no damages claims would be filed.
It also proposes to refund the amount paid by companies facing trail in these cases without interest thereon.
“The Bill proposes to amend the Income-tax Act, 1961 so as to provide that no tax demand shall be raised in future on the basis of the said retrospective amendment for any indirect transfer of Indian assets if the transaction was undertaken before May 28, 2012 (ie, the date on which the Finance Bill, 2012 received the assent of the President),” the proposed bill said.
“It is further proposed to provide that the demand raised for indirect transfer of Indian assets made before May 28, 2012 shall be nullified on fulfilment of specified conditions such as withdrawal or furnishing of undertaking for withdrawal of pending litigation and furnishing of an undertaking to the effect that no claim for cost, damages, interest, etc, shall be filed,” it added.
Welcoming the Centres’ move, Amrish Shah, partner at Deloitte India said: “The withdrawal of retrospective amendment relating to tax on indirect transfers is a welcome step and would reignite the choice of India as a favourable investment destination coupled with the low tax rates. With its removal, India is bound to be more favoured by foreign players as the tax rates are also quite attractive.”
The move is expected to benefit companies like Cairn Energy and Vodafone who are battling arbitration cases as a result of this law.
Both firms had won international arbitrations against levy of retrospective taxes on them.
An international arbitration tribunal in The Hague last year ruled that India’s imposition of a tax liability on Vodafone, as well as interest and penalties, breached of an investment treaty agreement between India and the Netherlands.
The bill also proposes to amend the Finance Act, 2012 so as to provide that the validation of demand under section 119 shall cease to apply on fulfilment of specified conditions such as withdrawal or furnishing of undertaking for withdrawal of pending litigation and furnishing of an undertaking that no claim for cost, damages, interest, etc, shall be filed.
The retro tax provision was introduced by the UPA government in Finance Act 2012. The purpose was to impose tax on capital gains made by companies like Cairn Energy Plc and Vodafone Group of UK retrospectively.
As per the amendment, tax raised for the indirect transfer of Indian assets before May 2012 would be “nullified on fulfillment of specified conditions” such as the withdrawal of pending litigation and an undertaking that no damages claims would be filed.
It also proposes to refund the amount paid by companies facing trail in these cases without interest thereon.
“The Bill proposes to amend the Income-tax Act, 1961 so as to provide that no tax demand shall be raised in future on the basis of the said retrospective amendment for any indirect transfer of Indian assets if the transaction was undertaken before May 28, 2012 (ie, the date on which the Finance Bill, 2012 received the assent of the President),” the proposed bill said.
“It is further proposed to provide that the demand raised for indirect transfer of Indian assets made before May 28, 2012 shall be nullified on fulfilment of specified conditions such as withdrawal or furnishing of undertaking for withdrawal of pending litigation and furnishing of an undertaking to the effect that no claim for cost, damages, interest, etc, shall be filed,” it added.
Welcoming the Centres’ move, Amrish Shah, partner at Deloitte India said: “The withdrawal of retrospective amendment relating to tax on indirect transfers is a welcome step and would reignite the choice of India as a favourable investment destination coupled with the low tax rates. With its removal, India is bound to be more favoured by foreign players as the tax rates are also quite attractive.”
The move is expected to benefit companies like Cairn Energy and Vodafone who are battling arbitration cases as a result of this law.
Both firms had won international arbitrations against levy of retrospective taxes on them.
An international arbitration tribunal in The Hague last year ruled that India’s imposition of a tax liability on Vodafone, as well as interest and penalties, breached of an investment treaty agreement between India and the Netherlands.
The bill also proposes to amend the Finance Act, 2012 so as to provide that the validation of demand under section 119 shall cease to apply on fulfilment of specified conditions such as withdrawal or furnishing of undertaking for withdrawal of pending litigation and furnishing of an undertaking that no claim for cost, damages, interest, etc, shall be filed.
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