Experts welcome govt’s move to bury retro tax, but with riders | Business Standard News

Clipped from: https://www.business-standard.com/article/economy-policy/experts-welcome-govt-s-move-to-scrap-retrospective-tax-121080501275_1.html

They, however, say are not sure if the lack of interest and costs payable by govt will satisfy all litigants

Nirmala SitharamanPhoto: PIB India

In a significant move, the union government has moved to amend the Income Tax Act to effectively nullify the retrospective tax demands in the law, that led to disputes with Cairn Energy and Vodafone.

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.

Experts say the government should have brought the Bill way earlier, but nonetheless welcomed it.

“The amendment for retrospective taxation yielded no revenues, only brought about disrepute to the government,” Dinesh Kanabar of Dhruva Advisors told a business news channel.

The government proposes to refund principal amount in full to the litigants, but the companies will need to withdraw the cases and furnish undertakings that they won’t claim cost damages or interest.

Hitesh Kajaria of KPMG says: “As the amounts involved are humongous, not sure if the lack of interest and costs payable by govt will satisfy all litigants”

“The damages that have been sought are in billions of dollars, I doubt whether all the big players will be willing to give up such money. These demands are outstanding and I am not sure how that’s going to work,” he told CNBC TV18.

Pranav Sayta, Tax Partner, EY, said, “This is a welcome step. It recognises the importance of certainty in tax laws which is a key factor in ensuring confidence in India as an attractive investment destination. The step could help restore India’s reputation as a fair and predictable regime apart from helping put an end to unnecessary, prolonged & expensive litigation.

“The addressal of the long pending ask of foreign investors for removal on retrospective tax levy on indirect transfers would go a long way in placing India as a more attractive investment destination and rekindle the hope that there would be no longer any ghost of retrospective taxation norms being applied,” Amrish Shah, Partner, Deloitte India, said.

“This will being a lot of stability in the minds of foreign investors looking at investing in or entering India for the long run. For the existing disputes on indirect transfer, the Government has been pragmatic in allowing them to be settled without any tax cost or penalty and to top it up providing for full refund of tax collected so long as the cases are withdrawn. The only sore points that no interest would be paid on such tax refunds. On balance, this is a really good step.”

“It is a welcome step in resolving the pending disputes at various forums including international forum. With the introduction of taxation of indirect transfers with retrospective effect in 2012, the tax department reopened the assessment in few cases citing the said retrospective amendments. The said cases had been pending in different high courts and in some cases in arbitration. With the current amendment, the tax department will not treat the said assesses as in default provided the pending litigation is withdrawn. This effectively resolves the dispute,” Amit Singhania, Partner, Shardul Amarchand Mangaldas & Co said.

“The government has extended the olive branch as it seeks to the bring an end to ongoing disputes which have resulted in overseas courts ordering a freeze of Indian assets. The taxpayer would be required to submit an undertaking waiving his right to pursue a claim in India or abroad in order to take the benefit of the revised section. Its a welcome move albeit a bit late in the day,” said Abhay Sharma, Partner, Shardul Amarchand Mangaldas & Co.

“This is indeed a very pragmatic step by the fovernment and should help it contain the widespread litigation in cases similar to Vodafone and Cairn. A worthy battle to lose,” Kumarmanglam Vijay, Partner, J Sagar Associates, said.

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