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With the President giving her assent to Finance Bill 2012, the retrospective amendments to the Income-Tax Act has become law. The Finance Ministry once again reiterated that it will not re-open cases where assessment has been completed before April 1, 2012.
However, Vodafone continues to be on the hook, since the Finance Ministry has said the Vodafone matter does not involve assessment of income, but is about alleged default in fulfilling the withholding tax obligation.
Speaking after inaugurating a new tax office, the Finance Minister, Mr Pranab Mukherjee, said, “I gave a commitment in Parliament with regard to retrospective amendments that CBDT (Central Board of Direct Taxes) will issue a policy circular to clarify that in cases where assessment proceedings have become final before the first day of April 2012, such cases shall not be reopened. Now, CBDT has issued a circular in this regard.”
‘Open ended' statement
However, tax experts have termed this statement as ‘open ended' and ‘simply harmless'. Mr Sunil Jain, Partner, J. Sagar and Associates, says, “It (Vodafone) is being alleged to be an assessee in default for failure to comply with the withholding obligation. Whether it will be benefited from this statement or not, it is not clear.”
However, with the Finance Bill becoming law, the tax authorities may revive the demand notice for payment of TDS. Section 113 of the Finance Bill provides a validation clause for notices sent or purporting to have been sent under the earlier form of the Act.
On the other hand, once the notice is revived, Vodafone will have the option of challenging the constitutional validity of the amendment. Vodafone acquired Hutch's asset in India in 2007. The total tax demand, including interest, comes to around Rs 11,000 crore.
Meanwhile, the Finance Ministry has decided to exempt software firms from multilevel tax deducted at source (TDS).
Relief to software firms
Mr Mukherjee said, “I have approved issue of a circular to avoid multilevel TDS on software under Section 194J of the Income-Tax Act. This will remove hardship in case of software distributors.”
This circular has been issued after obtaining views from an advisory group and Nasscom. This advisory group was constituted to resolve various issues in the area of transfer pricing and international pricing.
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