Rajya Sabha Returns Taxation Laws Amendment Bill To Nullify Retrospective Tax Demand

The Rajya Sabha on Monday returned to Lok Sabha the Taxation Laws (Amendment) Bill 2021 in the Lok Sabha which seeks 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.Since Taxation Laws (Amendment) Bill 2021 is certified as a money bill by the Lok Sabha Speaker, the Rajya Sabha has limited powers over it. As per Article 109 of the Constitution, the Rajya Sabha can only return a money bill to the Lok Sabha with or without its recommendations. It is then upon the Lok Sabha to pass the bill whether accepting the recommendations made by the Rajya Sabha or not.Yesterday, the Rajya Sabha passed a motion moved by Union Finance Minister Nirmala Sitharaman to return the Taxation Laws (Amendment) Bill 2021, which seeks to end all tax demands made on companies like Cairn Energy and Vodafone using the provision in Finance Act 2012 on indirect transfer of Indian assets prior to May 28, 2012. The Upper House did not make any recommendations with respect to the Bill."We are keeping the sovereign right of India to tax absolutely intact but with that said, when it was retrospectively applied causing a complete disturbance in the scheme of things for businesses, creating uncertainties", the Finance Minister said in Rajya Sabha during the discussion. She said that the bill will end the "ghost" of retrospective taxation clause which we have been carrying all these while from 2012. The opposition staged a walkout during the debate. Last week, the Lok Sabha had passed the Bill.The 2012 amendment was passed to overturn the Supreme Court verdict in the Vodafone case which held that gains arising from indirect transfer of Indian assets are not taxable under the then existing provisions of the Income Tax Act 1961.After that, the provisions of the Income-tax Act, 1961 were amended by the Finance Act, 2012 with retrospective effect, to clarify that gains arising from sale of share of a foreign company is taxable in India if such share, directly or indirectly, derives its value substantially from the assets located in India. The Finance Act, 2012 also provided for validation of demand, etc.This amendment attracted widespread criticism, especially international quarters, on the ground that the retrospective effect militates against the principle of tax certainty. In the statement of objects and reasons of the bill, the Ministry said that the restrospective clarificatory amendment " continues to be a sore point with potential investors". The Taxation Laws (Amendment) Bill proposes to amend the Income Tax Act to state that the effect of the 2012 amendment will be prospective in nature.The 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". May 28, 2012 was the date on which the Finance Act 2012 received the assent of the President.The Bill further proposes 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. It is also proposed to refund the amount paid in these cases without any interest thereon. The Bill also proposes to amend the Finance Act, 2012 so as to provide that the validation of demand, etc., under section 119 of the Finance Act, 2012 shall cease to apply on fulfilment of specified conditions such as withdrawal or furnishing of undertaking for withdrawal of pending litigation and furnishing of an undertaking that no claim for cost, damages, interest, etc., shall be filed."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", the Government said.The bill, if passed, is likely to benefit many companies including Vodafone and Cairn Energy who had to pay tax based on the retrospective law. Click here to read/download the Bill

Rajya Sabha Returns Taxation Laws Amendment Bill To Nullify Retrospective Tax Demand

LIVELAW NEWS NETWORK

This is a premium content
Available exclusively to
Our subscribers

INR 1099+GST

Tags

Rajya Sabha Returns Taxation Laws Amendment Bill To Nullify Retrospective Tax Demand

LIVELAW NEWS NETWORK

This is a premium content Available exclusively to Our subscribers

INR 1099+GST

Tags

This is a premium content
Available exclusively to
Our subscribers