New Delhi: In the Lok Sabha on Thursday, the finance ministry introduced the Taxation Laws (Amendment) Bill, 2021, to repeal the contentious retrospective tax demand provisions. The UPA government enacted the retroactive tax provision in the Finance Act of 2012. The goal was to tax capital gains made by companies such as Cairn Energy Plc and Vodafone Group of the United Kingdom retroactively.
According to the amendment, taxes levied on indirect transfers of Indian assets prior to May 2012 will be ‘nullified’ if certain conditions are met, such as the withdrawal of pending litigation and a promise that no damages claims will be filed. It also proposes that in these cases, the amount paid by companies facing a lawsuit be refunded without interest.
According to the government’s statement in Parliament, the proposed tax amendment will benefit up to 17 entities. Back taxes totaling Rs 1.10 lakh crore were sought from 17 entities that were taxed under the 2012 legislation. Only Cairn’s recovery yielded significant results.
Centre said that it will refund about Rs 8,100 crore collected to enforce such levies. Of this, Rs 7,900 crore was from Cairn Energy alone. ‘The Bill proposes to amend the Income-tax Act, 1961 so as to provide that no tax demand shall be raised in future on the basis of the said retrospective amendment for any indirect transfer of Indian assets if the transaction was undertaken before May 28, 2012 (ie, the date on which the Finance Bill, 2012 received the assent of the President),’ the proposed bill said.
‘It is further proposed to provide 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, etc, shall be filed,’ it added.
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