GOVT BURIES RETRO TAXES AMID DISPUTES, PROPOSES REFUNDS

NEW DELHI: In a bid to bury the ghost of retrospective taxation, the Union government on Thursday brought a bill in the Lok Sabha to withdraw all back tax demands on companies such as Cairn Energy and Vodafone and said it will refund the money collected to enforce such levies.

Finance minister Nirmala Sitharaman introduced The Taxation Laws (Amendment) Bill, 2021, in the Lower House, which seeks to withdraw tax demands made using a 2012 retrospective legislation to tax the indirect transfer of Indian assets.

The bill provides for the withdrawal of tax demand made on “indirect transfer of Indian assets if the transaction was undertaken before May 28, 2012 (i.e. the day the retrospective tax legislation came into being).” It also proposed to refund the amount paid in these cases without any interest.

The bill has a direct bearing on long-running tax disputes with British firms Cairn Energy Plc and Vodafone Group.

The Indian government has lost two separate arbitrations brought by the two companies against the levy of retrospective taxes.

While the government has virtually no liability in the Vodafone case, it has to refund $1.2 billion to Cairn Energy for the shares of the company it had sold, tax refund withheld and dividends confiscated.

The Bill states that the issue of taxability of gains arising from the transfer of assets located in India through the transfer of

NEW DELHI: The Centre will introduce in this session of Parliament a bill to restore the power of states to identify backward castes after it was cleared by the Union Cabinet on Wednesday, officials with knowledge of developments said, effectively bypassing a recent Supreme Court verdict that triggered protests in several states.

On May 5, while scrapping a separate quota for the Maratha community in Maharashtra, the Supreme Court had ruled that after a 2018 amendment in the Constitution, only the central government could notify socially and educationally backward classes (SEBCs) – not the states.

This interpretation of the 102nd constitutional amendment -- which related to giving constitutional status to the National Commission of Backward Classes – effectively struck a blow to the authority of state governments in identifying backward classes and provide them with reservation benefits.

Wednesday’s decision to bring the 127th Constitution Amendment Bill 2021 comes months before crucial polls in five states, including Uttar Pradesh, where other backward caste (OBC) groups hold sway. Last week, the Union government accepted a longstanding demand to introduce 27% reservation for OBC in medical and dental courses.

The new bill effectively nullifies the top court’s decision, which triggered protests by state governments and OBC groups. In India, separate OBC lists are drawn up by the Centre and each state concerned.

“The amendment is necessary to restore the powers of the state governments to maintain their list of OBCs which was taken away by a Supreme Court interpretation of Constitution (102) Amendment Act,’’ said a top government official who asked not to be identified. “If the state list was abolished, nearly 671 OBC communities would have lost access to reservation in educational institutions and in appointments one fifth of the community would have been impacted,’’ the official added.

This marks the third time in as many years that the central government has brought legislation to effectively rollback a decision of the Supreme Court relating to lower castes.

In 2018, the central government brought a bill to undo an apex court decision diluting some key provisions of the Scheduled Caste and Scheduled Tribe Prevention of Atrocities Act. The Supreme Court later upheld the amendments passed by Parliament.

In 2019, months before the national elections, the government brought an ordinance to revert to an old system of allotting reserved positions in government educational institutions after the Supreme Court upheld an Allahabad high court order scrapping the earlier roster system.

In both cases, the judicial decisions had touched off widespread protests.

The official quoted above said the Cabinet decision meant that Parliament now has powers to make changes to the central OBC list.

The National Commission of Backward castes (NCBC) will have the powers to look at complaints about implementation of various schemes that are meant for OBCs. “The move will uplift the status of backward castes,’’ the official said.

The bill cleared by Cabinet sought to amend Clause 1 and 2 of Article 342 A of the Constitution that pertains to the President’s and Parliament’s powers to include or exclude or specify any tribe, in consultation with the governor in case of states. The new amendment will insert a new clause called 342 A (3) which will authorise states to maintain their own lists.

On May 5, a five-judge bench -- comprising justices Ashok Bhushan, L Nageswara Rao, S Abdul Nazeer, Hemant Gupta and S Ravindra Bhat -- scrapped the validity of the Maratha quota law that breached the 50% limit set by a landmark 1992 judgment.

The ruling on depriving states of the power to identify SEBCs came by a majority of 3-2. Justices Bhushan and Nazeer said that states could still have their own list of SEBCs -- a view overruled by the majority that held state governments must rely on the Centre to include or exclude any community for granting reservation to SEBCs.

The majority dismissed the Centre’s understanding of the amendments and arguments by attorney general (A-G) KK Venugopal that the 102nd amendment did not deprive state legislatures to enact laws determining the SEBCs and conferring benefits on them.

Several states, including Maharashtra, Punjab, Rajasthan, Tamil Nadu and Karnataka, also asserted their right under Articles 15(4) and 16(4) to make special provisions for SEBCs and give them quota.

Both the Centre and states urged the court to lend credence to the parliamentary select committee report of 2017 and a statement of Union minister Thawarchand Gehlot on the floor of Parliament in August 2017 that the amendments did not affect the rights of the state governments to notify backward classes for reservation.

But the majority judgment rejected this plea.

On May 13, the Centre filed a review petition in the top court and contended that the May 5 judgment required a relook because there were errors apparent on the face of the record.

The review petition was dismissed on July 1.

Last week, the Union social justice ministry told Parliament that the Centre was consulting legal experts to “protect” the states’ powers to identify backward classes.

Minister of social justice and empowerment Virendra Kumar told the Rajya Sabha last month that the government was in consultation with legal experts and the Ministry of Law and examining ways to protect the power of the states in determining the State list of OBCs.

The minister said the “legislative intent” was reflected in the debates in Parliament when the amendment was passed and added that, “…it was declared unequivocally that the amendment wouldn’t impinge upon states’ powers to recognise and declare those classes in the state which were backward”.

Jawaharlal Nehru University professor SS Jodhka said: “The reality of castes is states specific.

For example, Jats may be dominant in one state but poor in the other, Valmikis are SC but in Andhra they are OBC and are Brahmins in parts of Maharashtra. Caste is also a relational category which means that it is state specific. State-specific categories should apply only for state jobs.”