President Ram Nath Kovid gave his assent to a bill to bury retrospective taxation. With this the Taxation Laws (Amendment) Bill has now become an Act.
Meanwhile, bills to amend the Deposit Insurance and Credit Guarantee Act and the Limited Liability Partnership Act and the Tribunal Reforms Bill have also become Acts.
The Taxation Laws (Amendment) Act amends the Income Tax Act 1961 and the Finance Act 2012. It stipulates that the demand for tax on the basis of retrospective amendment of 2012 for any indirect transfer of Indian property, if the transaction was made before May 28, 2012, “shall be deemed to have never been passed or made”. . It was on May 28, 2012 when the Finance Bill, 2012 received the assent of the President. The latest Act also envisages that no tax demand will be raised in future for transactions done before 28th May, 2012.
The Act also states that the demand already raised will be made ‘nil’, but all legal litigation will have to be withdrawn with the same conditions as the companies concerned. Once they submit the declaration, the government will refund the amount paid without any interest. Now, the government will come out with detailed rules and framework to implement the law.
Income tax demand has been raised in seventeen cases. Of these, four are prominent including Cairn (which paid ₹7880 crore as tax), New Cingular Wireless (₹119 crore), WNS Capital (₹47 crore) and Vodafone (₹44.74 crore).
Of these four, the matters related to Cairn in Scotland have been the most controversial. The Hague-based Arbitral Tribunal delivered its ruling in favor of Cairn Energy Plc and Cairn UK Holdings Limited (CUHL) on December 21, 2020. It asked India to pay Cairn over $1232.8 million in interest and $22.38 million for arbitration and legal costs. In March this year, India filed an appeal against the decision.
However, in May this year, the company filed a suit against Air India in a US court to enforce the award. Then in July, a French court passed an order freezing some of the Indian government’s assets in a case related to Cairn Energy. Earlier this year, Cairn moved courts in the US, UK, Netherlands, Canada, France, Singapore, Japan, the United Arab Emirates and the Cayman Islands to register and receive the award. This was the first step before the Government of India demanded the confiscation of assets.
Another important case pertains to the Netherlands-based Vodafone International BV, which won an award against India on September 25, 2020. Here also the government has filed an appeal in Singapore.
Other New Acts
An Act to amend the Deposit Insurance and Credit Guarantee Act (1961) to enable depositors to access their deposits up to the amount prescribed under deposit insurance (₹5 lakh) even if the bank is placed under moratorium . Depositors of PMC Bank will also be covered under the new mechanism. As of now, depositors have to wait for liquidation or resolution to be passed to avail the benefit of deposit insurance. It takes up to 8-10 years. The payment is to be made within 90 days from the commencement of the Act.
The Limited Liability Partnership (Amendment) Act aims to amend the Limited Liability Partnership Act (2008) to exempt twelve compoundable offenses dealing with procedural and technical contraventions.
The exemption of two provisions has also been given effect through the new law.
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