Abolition of retrospective tax 'doable': Pilot

Written by fe Bureau | New Delhi | Updated: Sep 28 2013, 09:13am hrs
Making a case for a stable tax policy that will attract foreign investors, corporate affairs minister Sachin Pilot has said that doing away with retrospective taxation is 'fairly doable'. On the NSEL probe, Pilot said the ministry of corporate affairs (MCA) did not give any recommendations to the Mayaram panel, which examined it. So far, MCA has asked the registrar of companies to examine the filings of NSEL and its associated entities and submit a report. Speaking at an event on Friday, Pilot also said that MCA has written to the Chhattisgarh government regarding a CSR matter.

Doing away with retrospective taxation: Pilot said doing away with retrospective taxation is a "doable" thing. The Damodaran panel in its report to help improve India's investment climate has suggested doing away with retrospective taxation, terming it as "significant disincentives" for entities wishing to do business in the country.

Speaking at the an event organised by the All India Management Association (AIMA), Pilot said: "The Damodaran panel has given its report to help improve India's investment climate. We have examined the report and think there are a few fairly doable things. One of those things is not having retrospective taxation." Pilot also said the impact of the regulations must be studied and "we must be able to know the positiveness of having them". He welcomed the panel's recommendation regarding making the regulatory environment easier for micro, small and medium enterprises.

The issue of retrospective taxation created a major controversy after UK-based global telecom giant Vodafone was asked to pay out a significant amount as taxes through a retrospective amendment to taxation laws pursuant to a Supreme Court order rejecting the government's tax demand from the company. The retrospective provision was introduced in the IT Act, 1961, in Budget 2012-13 after the Supreme Court ruled that Vodafone could not be taxed in India on its acquisition of Hutchison-Essar in 2007. The retrospective provision applied to all cross-border deals. The IT department had raised a tax demand of Rs 8,500 crore on Vodafone for the transaction effected in 2007 involving the purchase by Vodafone of a controlling 67% stake in Hutch-Essar from a company controlled by Hong Kong's Hutchison International. Since then, the Indian tax authorities have pursued Vodafone on the ground that it has not withheld tax. Vodafone denies that the transaction is taxable.

Vodafone had earlier expressed its keenness to reach an amicable settlement on the matter. Vodafone had offered to settle the dispute through conciliation to which government agreed, but there are differences over the rules under which it would take place and whether as Indian law or Uncitral.

MCA writes to Chhattisgarh government on CSR: On reports that the Chhattisgarh government's proposed CSR policy asks certain companies to contribute funds to a Chief Minister Community Development Fund as part of Corporate Social Responsibility norms, MCA minister Pilot said: "MCA has written to the Chhattisgarh government. It is not tenable if a state government is trying to get money deposited in CM's welfare scheme fund under the garb of CSR. You can't pocket this kind of money on what is a national law through Companies Act...we have tried to clarify that to the government of Chattisgarh."

MCA and NSEL probe: Asked about the probe into NSEL matter, Pilot said MCA had not made any recommendations to the Mayaram panel which examined it in detail. "As far as MCA is concerned, we will look at all companies/entities in question. We have asked for reports from the Registrar of Companies for all the numbers, figures, balance sheets, financial statements and to see if there has been any violations".