The center published a draft rule on Saturday that contains the requirements for the withdrawal of retroactive tax claims on aggrieved investors such as Cairn Energy Plc and Vodafone Plc, provided they “irrevocably” withdraw all existing proceedings against the government and make an “obligation” not to initiate any To claim costs, damages or interest in the future.
The draft was submitted by September 4th for public suggestions and comments from all stakeholders. After the deadline, the rules will be amended by incorporating relevant proposals to operationalize the Tax Act (amendment) 2021, which was passed during the monsoon session of Parliament said earlier this month, an official from the Treasury Department asked for anonymity.
The bill was passed to amend “a clarifying amendment” tabled by the Congress-led United Progressive Alliance (UPA) government in 2012 that was controversial for its retrospective application. The retrospective change resulted in 17 legal cases, including two arbitrations by Vodafone Plc and Cairn Energy Plc in foreign courts. India lost both last year.
“In order to implement the change made by the 2021 Act, draft regulations for the amendment of the income tax regulations of 1962 were drawn up, which specify the conditions to be met and the procedure to be followed to implement the change made by the 2021 Act.” The Ministry of Finance said in a statement with.
The law was amended to “create tax security and ensure that, once certain conditions have been met, the pending income tax procedure is withdrawn, any claims are canceled and the amount collected is refunded”. to the taxpayer without interest, ”it said.
Vodafone and Cairn did not respond to requests asking for comments on this development.
The controversial change was made about nine years ago. The change came after the Supreme Court ruled in 2012 that profits from indirect transfers of Indian assets are non-taxable under the existing provisions of the Income Tax Act.
“The idea is that a sovereign government has the right to levy taxes, but applying it retrospectively has created a lot of dissatisfaction,” Treasury Minister Nirmala Sitharaman told the Rajya Sabha on August 9 during a discussion on the law.
The draft law was introduced to the Lok Sabha on August 5th and passed the next day. The move is widely seen as investor-friendly and also ends messy litigation and arbitration, particularly with Cairn, where the company has claimed India’s foreign assets.
The law plans to amend the 1961 IT Act and the 2012 Finance Act, which were amended during the tenure of then Finance Minister Pranab Mukherjee, to introduce the retrospective tax law that has stood for all the bad things in the Indian tax system since then.
Ritesh Kumar S, Executive Director of IndusLaw, said: “The government’s approach to drafting the Rulebook seems to stem from the two arbitral awards secured by Vodafone and Cairn respectively. The exemption from the attachment of assets to enforce the order appears to be due in particular to Cairn’s experience. “
In July of this year, Cairn was successful in its application to the French court, Tribunal judiciaire de Paris, to freeze residential real estate in central Paris (through judicial mortgages) owned by the Indian government.
To date, the London-listed Cairn haunts the Indian government in multiple jurisdictions, with a primary focus on regions with high quality assets such as the US, UK, Canada, Singapore, Mauritius and the Netherlands.