The Centre on Thursday tabled a bill in Lok Sabha proposing to withdraw the contentious retrospective tax nearly a decade after its introduction. The Taxation Laws (Amendment) Bill proposes that no retro tax demand will be made if transaction is done before May 28, 2012. The bill also seeks to refund the paid amount, to affected parties, albeit without interest.
“Bill proposes to amend IT Act, so as to provide that no tax demand shall be raised in future on basis of said retrospective amendment for any indirect transfer of Indian assets if transaction before 28th May, 2012,” said government.
“It is further proposed to provide that the demand raised for indirect transfer of Indian assets made before 28th May, 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.”
This bill impacts retro tax cases of at least two big companies — Cairn Energy Plc and Vodafone Group of UK. Both firms had won international arbitrations against levy of retrospective taxes on them. Centre’s move will pave way for companies, including Vodafone and Cairn, to withdraw the litigation in Indian and international courts. Last month, more than 20 Indian state assets in central Paris were seized on the orders of a French Court that acted on a plea moved by Cairn Energy in the high profile tax dispute, causing major embarassment to India.
In 2012, the UPA regime changed the Income tax law retrospectively, making them effective from 1962, side-lining the Supreme Court’s verdict in the Vodafone case. The top court had said that the government was not justified in claiming this tax from the company.
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Using this law, the government slapped retrospective levy on Vodafone and Cairn Energy over the alleged capital gains made by the sale of their Indian assets. Both firms challenged the tax levy at the Permanent Court of Arbitration in The Hague in Netherlands and won the case against India. In both cases, the three-member tribunal, comprising a neutral member and one each from the disputing parties, was unanimous in its verdict. Even the chair nominated by India ruled in Cairns favour.
