BILL TO END RETROSPECTIVE TAX PASSED IN LOK SABHA
NEW DELHI: A bill that aims to end all retrospective taxation imposed on indirect transfer of Indian assets was passed by the Lok Sabha on Friday amidst continuous protests by opposition over the alleged snooping through the Pegasus spyware and other issues.
When the ‘The Taxation Laws (Amendment) Bill, 2021’ would be passed by Rajya Sabha too, all tax demands made on companies like Cairn Energy and Vodafone using a 2012 legislation on indirect transfer of Indian assets prior to May 28, 2012 will be withdrawn.
The Union finance minister described the 2012 legislation as “bad in law and bad for the investors’ sentiments”.
Rajendra Agrawal, who was in the chair, declared the bill passed after clause-wise discussions of the bill and a brief statement by Sitharaman.
The finance minister said there were 17 litigations due to the retrospective tax law and even the Supreme Court had said in 2012 that the tax could not be levied for the indirect transfer of shares of foreign companies.
NEW DELHI: A bill that aims to end all retrospective taxation imposed on indirect transfer of Indian assets was passed by the Lok Sabha on Friday amidst continuous protests by opposition over the alleged snooping through the Pegasus spyware and other issues.
When the ‘The Taxation Laws (Amendment) Bill, 2021’ would be passed by Rajya Sabha too, all tax demands made on companies like Cairn Energy and Vodafone using a 2012 legislation on indirect transfer of Indian assets prior to May 28, 2012 will be withdrawn.
The Union finance minister described the 2012 legislation as “bad in law and bad for the investors’ sentiments”.
Rajendra Agrawal, who was in the chair, declared the bill passed after clause-wise discussions of the bill and a brief statement by Sitharaman.
The finance minister said there were 17 litigations due to the retrospective tax law and even the Supreme Court had said in 2012 that the tax could not be levied for the indirect transfer of shares of foreign companies.
“The bill has been brought as a clarification,” she said.
Sitharaman said in 2014, the then finance minister Arun Jaitley had made a commitment to set up a high powered committee to look into the provisions of the 2012 law as the NDA government did not believe in retrospective taxes.
Jaitley had said that the present government did not believe in retrospective taxes but the law could not be amended at that time as there were court cases, she said.
The finance minister said once the lawsuits were settled in September and December 2020, the government had started consultations with various stakeholders, including the law ministry.
“Now we have come up with this bill at the next available opportunity. We are fulfilling the words given in this august house by former finance minister Jaitley and the government under the leadership of Prime Minister Narendra Modi brought the bill,” she said.
“It is also proposed to refund the amount paid in these cases without any interest thereon,” the bill said. The refund could be around ₹8,100 crore, which was collected by enforcing the 2012 law.
Besides creating uncertainly in minds of investors, the retrospective taxes have in recent months been overturned by international arbitration tribunals in two high profile cases -UK telecom giant Vodafone Group and oil producer Cairn Energy.
In the case of Cairn, the tribunal had asked the Indian government to return the value of the shares it had seized and sold, tax refund withheld and dividend confiscated to enforce the retrospective tax demand.
With the government refusing to honour the award, Cairn Energy Plc moved court in the US to seize assets of Air India. It got an order from a French court to freeze 20 Indian properties in Paris to recover $1.2 billion-plus interest and penalties.
The move clubbed India with nations such as Pakistan and Venezuela that have faced similar actions by entities seeking enforcement of awards.