Union Budget expectations:
Indirect Tax
Hormaz Daruwalla, Partner, Khaitan & Co
Power to arrest on ‘reason to believe’ under the ‘judicial’ system cannot be given to ‘quasi-judicial’ authorities under Indirect Tax. It is retrograde and prone to misuse.
The present Government, if serious about creating a non-adversarial tax regime to encourage commerce, must abrogate the draconian power to arrest given to tax collectors. In the face of such powers, the Government cannot expect to create an atmosphere conducive to augment development and economic growth.
The power only promotes mistrust and abrogating the same will be seen not only as sincerity of the Government in delivering but also be seen as prudent jurisprudence.
Direct Tax
Daksha Baxi, Executive Director, International Taxation, Khaitan & Co, Mumbai
The Vodafone type transaction with much less Indian connection results in the entire gains being taxable in India. Immediate need: Specify the threshold for substantial value and the manner of value determination; only gains proportionate to Indian assets should be taxable in India; transfer of shares of offshore listed company should be exempt. This will enable Indian companies to access cheaper foreign capital.
The non-binding nature of tax officer’s withholding certificate and time consuming AAR process need to be set right through administrative measures.
Foreign companies without business income and presence in India as well as Indian companies eligible to tax holiday should be exempt from MAT.
