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India Reassures US On Retrospective Tax Plans

by Mike Godfrey, Tax-News.com, Washington

24 April 2012


India's Finance Minister Shri Pranab Mukherjee has defended plans for retrospective tax legislation, telling the US Secretary of the Treasury that the proposals merely clarify the intent of current laws.

The assurance was made by Mukherjee during a meeting with Timothy Geithner in Washington DC. Proposals included in the Indian Finance Bill 2012 provide the government with the power to retroactively change tax laws and overturn a series of recent court judgments.

This has caused alarm, with warnings that it could create an atmosphere of uncertainty, discouraging investors. Indeed, telecoms company Vodafone has challenged the legislation out of concern that it might allow the government to override a recent Supreme Court ruling in its long-running tax dispute.

Mukherjee confirmed that Geithner had raised concerns during their meeting about the planned amendments to the Income Tax Act. In response, Mukherjee told him that the changes are "not substantive but clarificatory in nature as the changes reiterated only the intent of the legislation".

He also pointed out that Section 149 of the Income Tax Act does not allow the opening of any tax cases beyond six years, and that tax cases which have already been assessed and finalized up to April 1, 2012 cannot be reopened.

TAGS: court | capital gains tax (CGT) | tax | investment | business | holding company | India | foreign direct investment (FDI) | law | corporation tax | group taxation | offshore | controlled foreign corporations (CFC) | legislation | legislation amendments | telecoms | triangulation

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