Lawstreet Journal

Centre Introduces Taxation Laws Amendment Bill to Nullify Retrospective Tax Demand Provision

Lawstreet Journal 9 Aug 2021 4:44pm

Image courtesy: Lawstreet Journal Executive Centre Introduces Taxation Laws Amendment Bill to Nullify Retrospective Tax Demand Provision

The Union Ministry of Finance, on Thursday, August 05, 2021, introduced the Taxation Laws (Amendment) Bill 2021 in the Lok Sabha to nullify the effect of the amendment brought by Finance Act 2012. The 2012 amendment was passed to overturn the Supreme Court verdict in the Vodafone case which held that gains arising from indirect transfer of Indian assets are not taxable under the then existing provisions of the Income Tax Act 1961.

The provisions of the Income Tax Act, 1961 were amended by the Finance Act, 2012 with retrospective effect, to clarify that gains arising from sale of share of a foreign company is taxable in India if such share, directly or indirectly, derives its value substantially from the assets located in India. 

The Finance Act, 2012 also provided for validation of demand, etc. The amendment of the Act attracted widespread criticism, on the ground that the retrospective effect militates against the principle of tax certainty. 

In the statement of objects and reasons of the bill, the Ministry said that the retrospective clarificatory amendment “continues to be a sore point with potential investors.”

The Taxation Laws (Amendment) Bill 2021 proposes to amend the Income Tax Act to state that the effect of the 2012 amendment will be prospective in nature. The bill proposes to amend IT Act, so as to provide that ‘no tax demand shall be raised in future on basis of said retrospective amendment for any indirect transfer of Indian assets if transaction before May 28,… Continue Reading...

Tagged: Nirmala Sitharaman   Taxation Laws   Amendment Bill   Ministry of Finance  
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