Opinion

Vodafone: Government does a ‘Narasimha'

N.S.VAGEESH | Updated on November 14, 2017 Published on March 19, 2012

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Retrospective amendments reflect contempt for the judicial process.

Hindu Mythology talks of Lord Vishnu donning the Narasimha avatar to neutralise every ‘exemption' that the Asura, Hiranyakashipu, had secured through a boon.

He had sought a boon that would ensure that he would not die — inside his residence or outside; during day or night; either on earth or sky; by any weapon, or by a human being or animal. So the avatar had to be half man and half-animal, use claws and nails, do the deed at the threshold of the palace, on his lap and at the twilight hour!

The moral of that story — no matter how clever you are, you'll get your comeuppance at the hands of the almighty!

Settling scores

The Government seemed to have something similar in mind, going by the amendments it has brought in the Income-Tax Act through its latest Finance Bill. Telecom major, Vodafone, had, just a few weeks ago, won its case in the Supreme Court against the Income-Tax Department and escaped a levy of nearly Rs 10,000 crore. It would appear that the government couldn't stomach that loss and has used its legislating power to settle scores.

The amendments proposed pertain to the definitions of various terms (Sec. 2) and Sec.9 which provide various cases of income deemed to accrue or arise in India. And these have been done retrospectively — that is, with effect from April 1962.

Take just one example — the amending of Sec 2 (47) defining ‘transfer'. Now, ‘transfer' would include and always be deemed to have included disposing of or parting with an asset or any interest therein, or creating any interest in any asset in any manner whatsoever, directly or indirectly, absolutely or conditionally, voluntarily or involuntarily, by way of an agreement (whether entered into India or outside India) or otherwise, notwithstanding the fact that such transfer of rights has been characterised as being effected or dependent upon or flowing from the transfer of a share or shares of a company registered or incorporated outside India.” (emphasis added)

The whole of this section appears designed to plug every possible escape route arising out of the substantive interpretation of recent ruling of the Supreme Court in the Vodafone case.

What has shocked most experts however is that the amendments have been brought with ‘retrospective' effect.

The Finance Minister and other senior officials have taken the specious argument in various post-budget meetings and interviews that ‘retrospective' amendments were done before, so it was nothing new. And further, the Supreme Court did not say anything in its judgment about doing it prospectively and, hence, they chose to do it retrospectively!

Why go through courts?

At the Finance Minister's meeting with industry associations, his bureaucrats skilfully turned the tables on the industry representatives while discussing this issue.

They did this by asking whether the assembled barons would prefer the alternative of taxing the rich (Vodafone and others like them) to increasing the indirect taxes a bit more and hurting the common man (on whose behalf the industry was presumably making representations!) This is trying to be too clever by half. The fact that retrospective amendments have been done before doesn't make it right.

Secondly, the issue here is not about the rich or the poor.

It is about the letter and spirit of the law. Retrospective amendments defeat both and reflect contempt for the judicial process.

If everything (every legal reverse suffered by the government) is going to be overturned by retrospective amendments, why go through the courts in first place?

As the famous lawyer Nani Palkhivala said so many decades ago,

“The retrospective process can only serve to bring the law into contempt. They imply that the citizen's right of appeal is illusory, that the executive is omnipotent and that the hapless citizen should never hope to win in his fight against the state, however illegal the state's action might be.”

Published on March 19, 2012
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