Team Adda247 and BankersAdda are here with a Current Affairs Special Series. In this series, candidates will be introduced to current affairs topics daily, which will not only improve their general awareness but also will ensure that the candidates do not lack in any current affairs topic. Today’s Current Affairs topic is Lok Sabha passes the bill of amendment of Taxation Laws.
Lok Sabha passes the bill of amendment of Taxation Laws
Lok Sabha has passed the bill of Taxation Laws (Amendment) Bill, 2021.
Finance Minister Nirmala Sitharaman introduced the Taxation Laws (Amendment) Bill, 2021 in the Lok Sabha that looks for withdrawing tax demands made using a 2012 retrospective legislation to tax the indirect transfer of Indian assets which is now accepted by the Lok Sabha.
The bill is introduced to amend the Income Tax Act of 1961 and the Finance Act of 2012. The unpopular tax policy which was first brought in Budget 2012 had dull the investment climate and triggered a rash of domestic and international litigation and arbitration involving MNCs like Vodafone and Cairn. This bill has a direct connection with long-running tax disputes with British firms Cairn Energy and Vodafone Group.
The bill provides no tax demand shall be raised in the future on the basis of the said retrospective amendment to transfer any of Indian assets indirectly if the transaction was done before 28th May 2012.
Most controversial global tax dispute:
A retrospective tax bill of Rs. 40,000 crore which contains alleged tax liabilities penalties and interest was claimed by the Indian revenue authorities over Vodafone’s acquisition of the Indian assets of Hutch in 2007. This case has been widely considered as one of the most controversial global tax disputes over a cross-border deal.
TimeLine of controversy:
- In 2012, a number of heated litigation at lower courts had forced Supreme Court to take some actions.
- The Supreme Court had given its judgment that the tax department had no jurisdiction to enforce obligations on Vodafone for a transfer of shares of a foreign company between two non-residents.
- Then the sudden twist came which shook up the global tax community.
- The budget was announced by Finance Minister Pranab Mukherjee for the same year, the Indian parliament went leading and introduced retrospective amendments to the Income Tax Act, which was neutralized by the Supreme Court’ Judgement.
- That amendment had impacted many entities which were involved in a cross-border transaction like Vodafone.
Response of withdrawal tax demands:
As government amends to withdraw tax demands by using a retrospective legislation to tax, many tax experts have welcomed the government’s move. Even some say that it will provide much-needed relief and end litigation and this would clearly indicate the government’s intent to increase India’s investor-friendly image which will attract investments and promote faster economic growth and employment in the country.