Union Govt moves to abolish retrospective tax policy

New Delhi: The Union government has proposed amendments to the Income Tax Act and Finance Act, 2012, to the effect of not levying any kind of tax on any indirect transfer of Indian assets that had taken place before May 28, 2012, thus nullifying the controversial policy of retrospective taxation, according to a report in The Indian Express.

The fulfilment of specified conditions could nullify the tax demand raised for indirect transfer of Indian assets made before May 2012 according to the Bill drafted. Conditions like withdrawal or furnishing of an undertaking for withdrawal of pending litigation, and furnishing of an undertaking to the effect that no claim shall be filed could nullify the demand.

Since the introduction of the retrospective tax by the UPA government in 2012, the government has raised tax demands in 17 cases, about Rs 8,100 crore collected from four cases, including Rs 7,800 crore from Cairn, Finance Secretary T V Somanathan said.

The NDA government took seven years to make a positive step in removing the retrospective tax, a demand raised by several foreign investors.

In May this year, Cairn initiated the process to seize Indian assets to enforce the $1.2-billion arbitration award it won against the Indian government in its longstanding tax dispute.

The Taxation Laws (Amendment) Bill introduced by Finance Minister Nirmala Sitharaman Lok Sabha, "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 28th May, 2012 (i.e., the date on which the Finance Bill, 2012 received the assent of the President)", the Finance Ministry said in a statement.