Government To Amend Income Tax Act To Nullify Retrospective Tax Demands…..

Finance Minister Nirmala Sitharaman introduced The Taxation Laws (Amendment) Bill, 2021 in the Lok Sabha, which seeks to withdraw tax demands made on indirect transfer of Indian assets prior to May 28, 2012. Government also proposed to refund the amount paid in these cases without any interest thereon. Tax raised for the indirect transfer of Indian assets before May 2012 would be “nullified on fulfillment of specified conditions” such as the withdrawal of pending litigation and an undertaking that no damages claims would be filed, a government statement said.
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. “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. “In the past few years, major reforms have been initiated in the financial and infrastructure sector which has created a positive environment for investment in the country. However, this retrospective clarificatory amendment and consequent demand created in a few cases continues to be a sore point with potential investors. The country today stands at a juncture when quick recovery of the economy after the COVID-19 pandemic is the need of the hour and foreign investment has an important role to play in promoting faster economic growth and employment,” government further said.
“This decision helps to clarify our position with the investors,” Tarun Bajaj, revenue secretary at the finance ministry told a news channel, adding it would help solve pending cases with Cairn Energy and Vodafone if they withdraw litigation and meet certain conditions.

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