Centre Introduces Taxation Laws Amendment Bill to Nullify Retrospective Tax Demands

Centre Introduces Taxation Laws

The Union Ministry of Finance on 5th August, 2021 introduced the Taxation Laws (Amendment) Bill 2021 in the Lok Sabha to nullify the effect of the amendment brought by Finance Act 2012 to impose tax liability on gains arising from indirect transfer of Indian assets with retrospective effect.

In a huge move to settle International Disputes running into billions of dollars, the government said it will change tax laws to do away with demands for past payments. Companies like Cairn Energy will get refunds, the government said. Here are few points related to this story:

  • In 2012, the government controversially changed tax laws retrospectively. International companies which had acquired assets of Indian companies before then were told they had to pay huge amounts.
  • Taxes on the indirect transfer of Indian assets before May 2012 would be “nullified on fulfillment of specified conditions”, such as the withdrawal of litigation and an undertaking that no damages claims would be filed, a government statement said.
  • Cairn Energy, which has oil and gas operations in India, was awarded damages of more than $1.2 billion, plus interest and costs, in December by the Permanent Court of Arbitration at The Hague after a lengthy tussle with the Indian government. “Retrospective tax “has been a weight on the shoulders of India.
  • An International arbitration tribunal in The Hague last year ruled that India’s $2 billion tax claim on Vodafone was incorrect, and that it breached an investment treaty between India and the Netherlands.  The tax demand against Vodafone will now stand invalidated.
  • This week, it emerged that Vodafone promoter Kumar Mangalam  Birla had written to the government asking that it take over his Aditya Birla’s 27% stake in the debt-saddled telecom.  After Mr. Birla resigned as non-executive chairman of Vodafone on Wednesday i.e. on 4th August 2021, shares fell to their lowest in over a year.
  • Decision on 5th August, 2021, will allow the companies involved in disputes over retrospective tax to refunds without interest and costs.  It could provide large relief to Vodafone, whose stock has crashed this week. The telecom owes ₹ 22,000 crore to the government as payment for license and spectrum fees. All major telecoms lost a bid recently in the Supreme Court to change how those dues were calculated.
  • The Taxation Laws (Amendment) Bill, 2021, introduced by the Union Finance Ministry offers to drop tax claims against companies on deals before May 2012 that involve indirect transfer of Indian assets including the withdrawal of pending litigation and the assurance that no claim for damages would be filed. Further, it has said it would also refund any payments realized from these companies though without offering of any interest on it.

The government reportedly told Parliament that at least 17 entities stand to benefit from the proposed tax amendment and that the refund payable by it amounted to about Rs 8,100 Crore, of which Rs 7,900 Crore had come from Cairn alone.


Knowledge Source:

CBDT Extends Due Date For Filing Various Income Tax Forms

Leave a Reply

Your email address will not be published. Required fields are marked *