Finance Minister Nirmala Sitharaman introduced ‘The Taxation Laws (Amendment) Bill, 2021’ in the Lok Sabha that seeks to withdraw tax demands made using a 2012 retrospective legislation on indirect transfer of Indian assets prior to May 28, 2012. “It is also proposed to refund the amount paid in these cases without any interest thereon,” the bill said.
Besides creating uncertainly in minds of investors, the retrospective taxes have in recent months been overturned by international arbitration tribunals in two high profile cases -- UK telecom giant Vodafone Group and oil producer Cairn Energy.
While there was no substantial amount involved in the Vodafone case, in the case of Cairn Energy the tribunal had asked the Indian government to return the value of the shares it had seized and sold, tax refund withheld and dividend confiscated to enforce the retrospective tax demand.
With the government refusing to honour the award, Cairn Energy Plc moved court in the US to seize assets of Air India. It got an order from a French court to freeze 20 Indian properties in Paris to recover USD 1.2 billion-plus interest and penalties. The move clubbed India with nations such as Pakistan and Venezuela that have faced similar actions by entities seeking enforcement of awards.
Reacting to development, Cairn said it has “noted” the introduction of the bill and is “monitoring the situation and will provide a further update in due course.”