The government can withdraw the retrospective tax, which has caused huge trouble for companies like Vodafone and Cairn Energy. The proposed bill to withdraw this tax was introduced in the Lok Sabha today. In this, it has been proposed to do away with the tax rule, which is applicable on asset sales made by companies before 2012. This initiative of the government has come to the fore after its defeat in the case of Cairn Energy in the International Court of Arbitration. In the matter of retrospective tax imposed on Vodafone also, the decision of International Arbitration is yet to come.
Proposal to return retrospective tax
The government has proposed to return the retrospective tax collected so far through this bill. However, no interest will be paid on this. If the company withdraws its case in any forum in India without going to the arbitration court, then this tax will be returned to it. Retrospective Tax was brought in by amending the country’s Income Tax Act 1961. It was implemented in May 2012 after the consent of the then President Pranab Mukherjee. Under this, the government has the right to levy tax on mergers and acquisitions made by companies before this date.
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In the new bill brought to remove it, it has been said that the taxes which are being levied under the retrospective tax amendment will no longer be levied. According to the bill, there will be no demand for tax on asset transfer of any Indian companies to another company before May 28, 2012. Nangia Anderson’s director Neha Malhotra said that this means that the government will give up the right to tax on deals before May 2012. Till now the government was not accepting the decision of the arbitration courts saying that it is the government of the sovereign country. A sovereign government has every right to levy taxes.
This bill will also put a stop to the criticism that the Government of India has to face in the Vodafone and Cairn Energy case. It is believed that this bill will open the way for reconciliation with Vodafone and Cairn Energy. This will also send a good message to foreign companies investing in India.