Insight Online News / By Vikash Sahay
Indian Govt suddenly withdraws indirect transfer capital gain provisions for years prior to 2012.
This apparently is done to give benefit to Vodafone UK, which was in litigation since 15 years with Indian income tax department. Hopefully Vodafone UK will pump more money into “Idea” now….
Cairn UK will also be a beneficiary of this…
Minister Nirmala Sitharaman introduced The Taxation laws (Amendment) Bill in the Lok Sabha today ( BOLD)
As per the proposed changes, any tax demand made on transactions that took place before May 2012 shall be dropped and any taxes already collected shall be repaid, albeit without interest.
The government on Thursday took the first step towards doing away with the contentious retrospective tax law of 2012, that was used to raise large tax demands on foreign investors like Vodafone and Cairn and has culminated in a freeze order from a foreign court on India’s overseas assets.
Finance and Corporate Affairs Minister Nirmala Sitharaman introduced The Taxation laws (Amendment) Bill in the Lok Sabha on Thursday, to nullify the relevant retrospective tax clauses that were introduced in 2012 to bring past indirect transfer of Indian assets under the ambit of taxation.
As per the proposed changes, any tax demand made on transactions that took place before May 2012 shall be dropped and any taxes already collected shall be repaid, albeit without interest. To be eligible, the concerned taxpayers would have to drop all pending cases against the government and promise not to make any demands for damages or costs.
Experts welcomed the move as it will end the spectre of policy uncertainty for potential investors who have seen the Vodafone and Cairn cases unfold over the past decade. “This could help restore India’s reputation as a fair & predictable regime apart from helping put an end to unnecessary, prolonged & expensive litigation,” said Pranav Sayta, tax partner at EY.
Former Finance Minister, the late Pranab Mukherjee, had introduced the retrospective taxation power after the Supreme Court had held Vodafone couldn’t be taxed for a 2007 transaction that involved its purchase of a 67% stake in Hutchison Whampoa for $11 billion. Later, the tax was invoked against Cairn for a corporate reorganisation done in 2006-07 and its assets were frozen by authorities.