With PM Narendra Modi slated to visit the US later this month, FM Arun Jaitley has rekindled hopes of finding a resolution to tax disputes like Vodafone and Cairn.
With Prime Minister Narendra Modi slated to visit the US later this month, Finance Minister Arun Jaitley has rekindled hopes of finding a resolution to the high-profile tax disputes like Vodafone and Cairn in the next few days through judicial or executive resolution.
This is not for the first time that such a promise has been made – the difference this time is the urgency that he is showing now.
But any resolution of the cases that have emerged because of the high-pitched assessments during the UPA regime, including those associated with Rs 2.64 lakh crore of transfer pricing adjustments to the MNCs’ income since FY06, would require an approach similar to what the A P Shah panel suggested and the government accepted in the cases related to the imposition of minimum alternate tax (MAT) on FIIs prior to April, 2015.
If Arun Jaitley is ready to take the same path in other cases then he will have to clearly indicate that the government is no more interested in pursuing the cases that have emerged or can emerge due to the retrospective amendments which will allow the cases in litigation to get resolved fast and end the possibility of taking up any new case.
The A P Shah panel has paved the way for such an exercise by suggesting that MAT is not applicable on FIIs retrospectively.
Though the government is yet to hand over other cases to the panel, it will be a good idea to refer the whole gamut of retrospective tax amendments and also the transfer pricing ones to it with a mandate to suggest ways for cleaning up the Income Tax Act.
An indication, or a firm announcement in this regard before PM Modi starts his US visit on September 25 will add sparkle to it besides removing the uncertainties in the tax domain.
The Income-Tax Department has already claimed that it has achieved a breakthrough in resolving the transfer pricing tussle with the US companies which were pending for years that will lead to the signing of bilateral advance pricing agreements (APAs) providing long-term certainty in the tax treatment of such firms.
A clear stand on the retrospective amendment cases will help bolster the claims of the NDA government about taking measures to put in place a stable tax regime in the country.
This could be a good beginning that can be extended to other areas like gas pricing. If PM Modi has given a go ahead for this, though delayed, it is a step in the right direction even if it has political ramifications.