The Parliament on Monday passed a bill that seeks to do away with the contentious retrospective tax provision and will impact retro tax cases of Cairn Energy and Vodafone.
Before the Taxation Laws (Amendment) Bill, 2021 was moved in the Rajya Sabha for its consideration by Finance Minister Nirmala Sitharanan on Monday, members from Congress, Trinamool Congress and DMK staged a walkout, saying the government had listed the bill in supplementary agenda without giving them adequate notice.
The bill had earlier been passed by Lok Sabha.
The bill proposes to amend the Income Tax Act, 1961 to provide that no tax demand shall be raised in future on the basis of the retrospective amendment for any indirect transfer of Indian assets if the transaction was undertaken before May 28, 2012.
The Finance Bill, 2012 had received the assent of the President on this day.
The new bill proposes that the demand raised for indirect transfer of Indian assets made before May 28, 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 shall be filed.
British oil and gas company Cairn Energy is seeking to recover USD 1.2 billion from India after winning an arbitration against retro tax. An appeal against the order was filed in the Hague Court of Appeal on March 22, 2021 by the Indian Government.
The Finance Act, 2012 provided for validation of demand under the Income-tax Act, 1961 for cases relating to indirect transfer of Indian assets.
In its pursuance, income tax demand had been raised in seventeen cases.
In two cases, assessments are pending due to stay granted by High Court. Arbitration under Bilateral Investment Protection Treaty with United Kingdom and Netherlands had been invoked in four cases. In two cases, the Arbitration Tribunal ruled in favour of taxpayer and against the Income Tax Department.
The statement of objects and reasons of the new bill states that clarificatory amendments made by the Finance Act, 2012 invited criticism from stakeholders mainly with respect to retrospective effect given to the amendments.
"It is argued that such retrospective amendments militate against the principle of tax certainty and damage India's reputation as an attractive destination. 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," it says.
"However, this retrospective clarificatory amendment and consequent demand created in a few cases continues to be a sore point with potential investors," it adds.
The statement says that 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.
Congress leader Adhir Ranjan Chowdhury accused the government of passing bills in hurry amid protests by the opposition.
"We haven't demanded much, our only demand is that there should be a discussion on Pegasus snooping. Or demand is valid, but this government is trying to frame it as invalid," said the Congress leader.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
