After the Union’s finance minister, Nirmala Sitharaman, submitted the tax law (amending law) 2021 for review on Friday, it was passed in the Lok Sabha without debate amid slogans and protests from opposition members of parliament.
The draft law aims to abolish the controversial tax refund.
Moving the bill for review and adoption, Sitharaman said, speaking to the House of Commons, “As for the reason we are bringing this bill, I would like to say a few words about the issue of Indian assets through the transfer of shares in a foreign company has been the subject of protracted litigation, and in 2012 the Supreme Court ruled that such income taxes are not subject to the provisions of the Income Tax Act.
“Therefore, the Income Tax Act of 1961 was retrospectively amended by the Finance Act of 2012 to make it clear that such income is taxable. The Finance Act of 2012 also provided that the claim made for this income is valid even if the claim is made removed by the courts. So it happened that this post-tax was tabled as a clarifying amendment. However, there was quite a bit of disagreement about this measure and, although we were in the opposition, we had raised this very clearly, objection that it was illegal and also bad for the mood of investors, “said the Union minister.
She told the Lok Sabha: “After coming to power in 2014 under the leadership of Prime Minister Narendra Modi, Treasury Secretary Arun Jaitley made a clear commitment here in the House of Representatives in 2014 that we would not believe in the law as an afterthought and we would certainly set up a high-level committee to deal with all of these cases, and I am pleased to say that the high-level committee has looked at this matter between 2014 and today and we haven’t left a single motion on the base of the amendment had been established in 2012. “
“However, for the cases prior to 2012 for which it was applied retrospectively, there are 17 such cases. Of these, two went to court and were suspended. The claims could not be pursued any further, Treasury Secretary Arun Jaitley, we fundamentally do not believe in that. However, we were unable to respond to it in 2014 either because there were two cases, ”said Sitharaman in the House of Commons.
Sitharaman informed the Lok Sabha that the Union’s then Treasury Secretary Jaitley had said at the time that the government should wait for a logical conclusion and informed the Lok Sabha that the logical conclusion would be in one case in September 2020 and in another was achieved in December 2020.
She said: “These cases have been investigated by the government, consultations have been held with the Ministry of Justice, and since the budget meeting was under contract, the government was unable to begin much activity at the time.”
“We have come to the next available session, the monsoons session, which is now to keep the word of former Treasury Secretary Arun Jaitley, under the leadership of Prime Minister Narendra Modi, and to maintain the BJP’s commitment that we do not believe in retrospective Tax collection. We are fulfilling this word. So I urge the House to discuss the bill and have it passed, “added the Union Finance Minister.
The Taxation Laws (Amendment) Bill proposes to amend the Income Tax Act of 1961 to provide that, based on the retrospective amendment, no future tax claims will be made on indirect transfers of Indian assets if the transaction is made before 28, 2012.
The 2012 finance law received the approval of the president on that day. The new law stipulates that the request for indirect transfer of Indian assets made before May 28, 2012, if certain conditions are met, such as withdrawal or provision, will be canceled , Interest is charged.
British oil and gas company Cairn Energy plans to reclaim $ 1.2 billion from India after winning arbitration against the back tax. On March 22, 2021, the Indian government appealed the order to the Hague Court of Appeal.
The Finance Act of 2012 provided for the validation of the Income-Tax Act 1961 requirement for cases related to the indirect transfer of Indian assets. In its application, the income tax claim was raised in seventeen cases.
In two cases, judgments are pending on a suspension granted by the High Court.
In four cases, arbitration proceedings under the bilateral investment protection agreement with the United Kingdom and the Netherlands had been commenced. In two cases the arbitration tribunal ruled in favor of the taxpayers and against the income tax office.
The explanatory memorandum for the new draft law states that the clarifying changes to the 2012 Finance Act triggered criticism from stakeholders, especially with regard to the retroactive effect of the changes.
“It is argued that such retrospective changes are against the principle of tax security and damage India’s reputation as an attractive travel destination. Major reforms have been launched in the financial and infrastructure sectors in recent years, creating a positive environment for investment in the country, ”it said.
“However, this retrospective clarification change and, in some cases, the resulting demand remains a sore point with potential investors,” she added.
The statement said the country is now at a point where rapid economic recovery from the COVID-19 pandemic is the order of the day and foreign investment has an important role to play in promoting faster economic growth and employment to play.
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