New Delhi:
Finance Minister Pranab Mukherjee today firmly defended deferring implementation of the General Anti-Avoidance Rules (GAAR), which are aimed at preventing tax evasion and have led to fears that they would target foreign institutional investors. In his reply to the debate on the Finance Bill in the Lok Sabha, he said the deferral of the tax proposals to 2013, announced in Parliament yesterday, was not a result of fear or apprehension.
The Left moved for division on an amendment brought by the government to give effect to the deferral of GAAR, but was defeated 342 to 22, with the BJP backing the government. The Left, accusing the UPA of surrendering to market forces and the US, insisted that GAAR be part of this year's Finance Bill. The Lok Sabha passed the Finance Bill.
In his speech, Mr Mukherjee said, "GAAR I have agreed to defer, but not because of fear or apprehension. I am not afraid of any consequences." He also defended a retrospective tax on overseas deals involving assets in India, such as the one involving Vodafone's 2007 acquisition of Hutchison Essar.
Mr Mukherjee said such deals must be guided with by double taxation avoidance agreements or the companies must pay tax in India. "(You) Cannot make money on assets made in India by not paying tax in India or somewhere else, some tax haven through a series of subsidiaries and make huge capital gains on assets based in India," he told the House.
The Income Tax department had claimed that Vodafone was liable to pay $2.2 billion in capital gains because the underlying assets for the deal were based in India, but that argument was rejected by the Supreme Court. Mr Mukherjee countered criticism that he was challenging the ruling of the Supreme Court on the retrospective taxation issue by saying that it was solely the right of the legislature to frame laws. "I am aware of the power of legislature, it is the power of legislature to make law. Supreme Court can interpret, but legislature can make amendment to correct the flaw," Mr. Mukherjee said.
"Law has to be framed by us. If there is conflict between intent and interpretation of judiciary, then we respectfully say that it is our right," he added.
The Left moved for division on an amendment brought by the government to give effect to the deferral of GAAR, but was defeated 342 to 22, with the BJP backing the government. The Left, accusing the UPA of surrendering to market forces and the US, insisted that GAAR be part of this year's Finance Bill. The Lok Sabha passed the Finance Bill.
In his speech, Mr Mukherjee said, "GAAR I have agreed to defer, but not because of fear or apprehension. I am not afraid of any consequences." He also defended a retrospective tax on overseas deals involving assets in India, such as the one involving Vodafone's 2007 acquisition of Hutchison Essar.
Mr Mukherjee said such deals must be guided with by double taxation avoidance agreements or the companies must pay tax in India. "(You) Cannot make money on assets made in India by not paying tax in India or somewhere else, some tax haven through a series of subsidiaries and make huge capital gains on assets based in India," he told the House.
The Income Tax department had claimed that Vodafone was liable to pay $2.2 billion in capital gains because the underlying assets for the deal were based in India, but that argument was rejected by the Supreme Court. Mr Mukherjee countered criticism that he was challenging the ruling of the Supreme Court on the retrospective taxation issue by saying that it was solely the right of the legislature to frame laws. "I am aware of the power of legislature, it is the power of legislature to make law. Supreme Court can interpret, but legislature can make amendment to correct the flaw," Mr. Mukherjee said.
"Law has to be framed by us. If there is conflict between intent and interpretation of judiciary, then we respectfully say that it is our right," he added.
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