Narendra Modi's Washington test

Narendra Modi's Washington test

If Modi gets the world’s biggest power right, his pursuit of larger global goals...
Small banks or banks for ‘small’ people?

Small banks or banks for ‘small’ people?

Unless appropriate sub-limits are imposed on loans, there is a serious...

Budget: Tax Vodafone-like deals retrospectively

Mar 16 2012, 18:42 IST
Comments 0
SummaryIn a measure that will have far-reaching impact on foreign investment and the Vodafone case having a tax implication of Rs 11,000 crore, the government today proposed amendment in the Income Tax Act retrospectively from April 1, 1962.

In a measure that will have far-reaching impact on foreign investment and the Vodafone case having a tax implication of Rs 11,000 crore, the government today proposed amendment in the Income Tax Act (I-T Act) retrospectively from April 1, 1962.

Under the proposed amendment, all persons, whether resident or non-residents, having business connection in India will be required to deduct tax at source and pay it to the government even if the transaction is executed on a foreign soil.

The amendment will apply to all past transactions concerning assets in India.

Commenting on the government move, PwC Direct Tax Leader Rahul Garg said: "This amendment is to seek an overturn to the ruling of the Supreme Court judgment on mainly two cases-- Vodafone and Azadi Bachao Andolan."

In the Azadi Bachao Andolan case, it was held that an entity having a tax remittance certificate from Mauritius would be exempt from paying tax in India.

The changes in the Income Tax Act, according to experts, will also have a bearing on about 500 overseas deals of similar kind, experts said.

As per the proposed changes in IT Act, 1961, any asset which is registered or incorporated outside India shall be deemed to be situated in India "if the share or interest derives, directly or indirectly, its value substantially from the assets located in India.

"These amendments will take effect retrospectively from April 1, 1962 and will accordingly apply in relation to the assessment year 1962-63 and subsequent assessment years," says the Memorandum to the Finance Bill, 2012.

The amendment may have implications on Vodafone case in which the Supreme Court had held that the Income Tax department does not have the jurisdiction to levy Rs 11,000 crore as withholding tax on Vodafone for its USD 11 billion acquisition deal with Hutchison Essar in 2007.

Reacting to the proposal, Hitesh Sharma, Ernst & Young Tax Partner, said: "Going forward the corporates will want a certainty and clarity on indirect transfer of withholding tax".

"It was not clear how far it is possible for the government to penalise an entity after issuing clarification with retrospective effect. We shall have to wait for the Supreme Court verdict on this," Sharma added.

Ved Jain, Chairman of Assocham Direct Tax Committee, also opposed it by saying, "there should not be any amendment ..You cannot tax whatever has not been taxed before. Industry is not in favour of this proposal".

On February 17, the government filed a review

Single Page Format
Ads by Google
Reader´s Comments
| Post a Comment
Please Wait while comments are loading...