Finance Minister Nirmala Sitharaman hoped that amendment to Income Tax Act 1961 and Finance Act 2012 to repeal retrospective taxation will put to an end to the ghost of past, which was being carried from 2012.

During the reply on the Bill in Rajya Sabha, on Monday, she said: “It is a simple amendment with three different processes. People can really understand easily what is offered, and I am sure this will be appealing enough and putting an end to the ghost, which we have been carrying from 2012.”

The next step

Sitharaman also said that the next step to end tax disputes would begin soon. “Discussions with litigating companies will happen after the enactment of this law. Once it is passed, we are confident that they would also find the provision very useful to them, and probably consider taking what we have brought in,” she said, while making it clear that the Bill does not dilute the sovereign right of the government to tax.

While the Finance Minister was replying, the House saw walkout by Congress and TMC.

Noticing this, Sitharaman said: “What is interesting and I find this contradiction repeatedly showing in the case of the Congress party is that it was a clarificatory amendment against a Supreme Court order brought in by the Congress. And they didn’t do any correction to it. ...After that when it went into arbitration, we committed to make sure that we will do the necessary amendments...when it was passed a couple of day ago in Lok Sabha, Former Finance Minister belonging to the Congress party, I am not even naming him here, welcomed it”

“He welcomed it saying it rather comes too late, it should have come even early, but it’s alrights it come now. If the former Finance Minister belonging to the party said that today for the party to walk out just reveals how there is no one view coming out from the Opposition belonging to even one party, that is the Congress party,” she said, adding: “They speak one thing here, they speak one thing in Lok Sabha, they speak something outside when they are in media’s glare. Unfortunately, when we expect the Opposition and when Opposition also demands from us constantly that it has to be discussed, every Bill has to be discussed, they do not want to discuss.”

“A Bill which was passed by the Lok Sabha, which was welcomed by their own Finance Minister, and this kind of dichotomy in the position they periodically take is amazing.,” she pointed out.

The Rajya Sabha has returned the Bill to amend the taxation and it is expected that the President will give his assent soon, after which it will become a law. Lok Sabha had approved the Bill last Friday.

The Bill provides that tax demands raised on the basis of the 2012 retrospective amendment for any indirect transfer of Indian assets, if the transaction was undertaken before May 28, 2012, shall be “deemed never to have been passed or made”. It was on May 28, 2012, that the Finance Bill 2012 got the President’s assent. It also envisages that no tax demand will be raised in future for transactions made before May 28, 2012.

She also said that though demands were raised against 17 companies, only three had paid and these include – Cairn Energy (₹7,879.73 crore), Vodafone (₹44.74 crore) and WNS Capital (around ₹48 crore). Now, these companies need to be refunded, subject to some conditions. In fact, on the day of its introduction, Finance Ministry officials talked about four companies, with the fourth company being New Singular Wireless (₹119 crore).

“We have hard wired in the Bill no interest will be paid on the refund amount. Also, they should withdraw or submit an undertaking to withdraw (legal suits). We shall prescribe the format and they will undertake it,” she said.

A sore point

The amendment made in the Income Tax Law by Finance Bill 2012 was clarificatory in the nature, she said, adding that consequent demand created in a few cases continues to be a sore point with potential investors.

“The country today stands at a juncture when quick recovery of the economy after the pandemic is the need of the hour, and foreign investment has an important role to play in promoting faster economic growth and employment,” she said, highlighting the need to bring in this legislation.

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