Changes in retrospective tax amendments unlikely in Budget
May, 29th 2014
The new government in the forthcoming budget is unlikely to take a view on the retrospective amendment to Income Tax laws as it is keen to weigh pros and cons before taking any decision on this matter.
"Time is too short for undoing the amendments made to IT Act in this Budget. It would require widespread consultation with stakeholders. All pros and cons have to be analysed," official sources said.
The last government could not take a view on reversing the retrospective tax amendment Act, sources said.
A decision needs to be taken on going ahead with changing amendments before pending litigations, including that involving Vodafone, are resolved, sources said adding that the pending litigations would have huge implication on revenue.
Amendment to Income-tax Act with retrospective effect made by the UPA government in 2012 to protect revenue had evoked sharp reactions from domestic as well as global investors.
Following the amendment to the Tax laws, the authorities issued a letter to Vodafone International Holdings BV stating that the company was required to pay tax demand of about Rs 11,217 crore along with interest.
Besides, an Income-Tax Department's order in January this year held that Edinburgh-based Cairn plc made capital gains of Rs 24,503.50 crore when it transferred its entire India business from subsidiaries incorporated in Jersey, a tax haven, to the newly incorporated Cairn India in 2006.
For clarity on retrospective tax amendment, the previous government had constituted a committee, headed by tax expert Parthasarathi Shome.
The panel had suggested that retrospective amendment of tax laws should occur in exceptional or rarest of rare cases and with particular objectives and apply to matters that are "genuinely clarificatory" in nature.
Yesterday, Law Minister Ravi Shankar Prasad had said retrospective tax should be generally avoided as the country needs foreign investment to boost the economy.
"The larger view is that retrospectivity is avoided to the maximum. The fiscal regime, the policy regime, taxation regime must be very evident because India needs investment," he had said.