Comments
The Prime Minister has asked the Parthsharthi Shome panel to look into the applicability of the tax avoidance rules on past deals cut by FIIs and portfolio investors. Dr Manmohan Singh has included the retrospective amendment issue in the terms of reference of the General Anti-Avoidance Rules Committee.
This move is seen as an effort to reassure foreign investors on the matter of taxing earlier transactions. Although Parliament has approved the retrospective amendment to the Income-Tax Act, its real impact will depend on the nature of the guidelines issued under the Act. The Government can, at any time, soften or harden the law by making changes to the guidelines.
The retrospective amendment in the Income-Tax Act and GAAR was proposed in this year’s Budget. The Government has announced that GAAR will go into effect from April 1, 2013, while the retrospective amendment has been made effective from April 1, 1962.
A statement from the Prime Minister’s Office said, “The Prime Minister has decided to refer the issue of the implications of this (read, retrospective amendment on FIIs and portfolio investors) to the Expert Committee on GAAR.” The committee was constituted to engage in a widespread consultation process and finalise the GAAR Guidelines.
There is an additional issue relating to the taxation of portfolio investment, particularly in the context of the amendment made to the Income-Tax Act relating to the taxation of non-resident transfer of assets where the underlying asset is in India.
“It is necessary to have clarity on the tax liability of portfolio investors and Foreign Institutional Investors as a result of this amendment particularly when the investment is made through a registered stock exchange in accordance with SEBI guidelines and purely in the form of portfolio investment,” the statement added.
It also said that any clarification needs to be harmonised with the GAAR guidelines and will have to address any residual concerns outside of GAAR. Although the Finance Ministry did clarify with reference to retrospective amendment that those cases will not be reopened where assessment proceedings have become final before April 1, 2012, there are still some doubts, particularly in cases such as Vodafone.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.