In a major move, the Indian government has decided to scrap the retrospective tax of 2012, that made any capital gains resulting from the transfer of shares from a foreign entity, whose assets were located in India, taxable from 1962.
To this end, finance minister Nirmala Sitharaman has introduced a bill in the Lok Sabha that proposes to amend the Income Tax Act of 1961 to ensure that no tax demand shall be raised in future on the basis of the said retrospective amendment for any indirect transfer of Indian assets if the transaction was undertaken before May 28, 2012.
The move would impact retrospective tax cases of two big companies namely UK-based Vodafone Group and Cairn Energy Plc, both of which won international arbitrations against levy of retrospective taxes. Subsequently, Cairn sought to recover $1.2 billion from India.
The bill also proposes to refund the amount paid in these cases without any interest.
The government added that the issue of taxability of gains arising from the transfer of assets located in India through the transfer of the shares of a foreign company (hereinafter referred to as ‘indirect transfer of Indian assets’) was a subject matter of protracted litigation.
