After PARLIAMENT passed legislation to end retroactive taxation, The Indian Express has learned “informal talks” with companies that have received communications in this category, including Cairn Energy and Vodafone Group, to resolve outstanding issues.
Those negotiations could be finalized within the next month, sources said, adding that any formal statement from either the government or corporations would not be released until afterwards.
However, the government has reiterated that its sovereign right to taxation cannot be challenged and has stated that any settlement is conditional on companies dropping their claims for interest and other charges and withdrawing any pending litigation.
“We have started some informal discussions with companies,” said a senior government official.
In response to an email from The Indian Express asking for a comment, a spokesman for the Vodafone Group replied that they would “not comment on retrospective tax developments”. However, a source close to the company said it would not clarify its position until after “negotiations” with the government were completed.
After the UPA government’s retrospective change in 2012, tax claims were raised in 17 cases. The government has raised Rs.8,100 billion in four of these cases, including Rs.7,900 billion from Cairn Energy. This amount will be refunded to companies once they have agreed to resolve the dispute on terms set by the government.
Explained
Relief for investors
After the retrospective change in 2012, tax claims were raised against 17 companies. The new approach of the center closes lengthy legal disputes and ensures security in tax law for investors.
Last Thursday, the government proposed amendments to the Income Tax Act and the Finance Act 2012 to effectively stipulate that no indirect transfer of Indian assets would be required if the transaction was conducted before May 28, 2012. The changes were approved in Lok Sabha on Friday, while Rajya Sabha gave the go-ahead on Monday.
After the law was passed, Cairn said in a statement that it will monitor the progress of the 2021 tax bill amendment to certain changes to the retrospective taxation measures introduced by the 2012 Finance Act. We are monitoring the situation and will provide another update in due course, ”the statement said.
Cairn Energy did not respond to requests from The Indian Express.
Under the new law, a request for indirect transfer of Indian assets made prior to May 2012 will be waived if certain conditions are met, such as redemption or an obligation to withdraw pending litigation and an obligation not to bring a lawsuit.
The move to amend the legislation complies with a long-standing demand from foreign investors and comes seven years into the NDA government’s tenure – at a time when the government has suffered setbacks in its arbitration proceedings against Cairn Energy and Vodafone.
In May, Cairn launched the Indian property confiscation process to enforce the $ 1.2 billion arbitration award it won in its longstanding tax battle with the government. Last September, the Hague Permanent Arbitration Court ruled that India’s retrospective demand of Rs.22,100 billion in capital gains and withholding tax imposed on Vodafone on a 2007 deal “violated the guarantee of fair and equitable treatment.”