Chidambaram to approach Parliament after resolving Vodafone row

Finance Minister P Chidambaram today said he would approach Parliament with changes to the retrospective amendments to the Income Tax Act after the tax row between Vodafone and the tax department was resolved.

“We have decided the appropriate time to go to Parliament is after we have been able to resolve the Vodafone case and get clarity on how that case has been resolved,” Chidambaram said at a customary post-Budget interaction with business chambers. “I think without resolving the Vodafone case, if we go to Parliament, it would ask what is going on. It would say, ‘Last year, you came to us. We amended the Act. This year, you are coming to us to amend it again. What happened to the Vodafone case?’ What would I answer?” he asked.

He said his ministry was aware of the Parthasarathi Shome committee’s recommendations. “Appropriate decisions will be taken on the Shome committee recommendations. I cannot tell you now. The time to go to Parliament is not on a piecemeal basis, but to look at all the amendments made last year, arising directly or indirectly from the Vodafone case, after the case is resolved.”

Chidambaram was responding to a query from the floor of the House. The query related to clause (i) of sub-section (1) of section 9, where “capital asset situated in India” was defined on the basis of the companies that could come under the tax net. The clause says, “An asset or a capital asset being any share or interest in a company or entity registered or incorporated outside India shall be deemed to be and shall always be deemed to have been situated in India, if the share or interest derives, directly or indirectly, its value substantially from the assets located in India.”

The questioner said the explanation left scope for ambiguity on the definition.

In its draft report, the Shome committee had recommended through an amendment, the words “an asset or” be omitted from the explanation. The panel’s final report has not been made public.

Chidambaram said though he agreed the explanation on substantial assets in India could be dealt with independent of the Vodafone case, introducing these amendments were linked to the case and, therefore, shouldn’t be changed after the tax dispute was over. Last year, the finance ministry had sent a reminder notice to Vodafone to pay Rs 14,000 crore of income tax dues, which the telecom major said it didn’t owe. Later, it offered conciliation. “The matter will go to the Cabinet. If the Cabinet accepts this, it will go to conciliation,” Chidambaram had said.

Replying to another query, Chidambaram said safe harbour rules would be made by this month-end or next month.