Industry concerned over proposed I-T Act amendments

Fears of India Inc over the proposed amendments to Income Tax Act with retrospective effect from 1962 refuse to die, even as the finance ministry had assured there would not be any unfair treatment to the industry and cases of over six-year old cannot be re-opened.

"This is probably the worst time for clarifications of intent and interpretation when there is all round uncertainty; political consensus is elusive and there are hiccups in implementation of decisions," Federation of Indian Chambers of Commerce and Industry (Ficci) President R V Kanoria said at post-Budget interactions with Finance Minister Pranab Mukherjee.

He said it was obvious that maximising revenues would be the intent of any government, but it is for the courts to interpret the wordings of the law.

"The feeling in industry, however, is that decisions of the court could be overturned, thereby undermining the sanctity of the legal system and also questioning the fairness of a parliamentary democracy," he said.

Other industry players said amending a law with retrospective effect from 1962 gives the wrong signals to investors.

The finance minister did not touch upon the issue this time. However, at earlier post-Budget interactions with all chambers, the finance ministry had explained that cases of over six year old cannot be re-opened for tax purposes, even if amendments are proposed from 1962.

The amendments are important because the Supreme Court had held the I-T Department does not have the jurisdiction to levy Rs 11,000 crore tax on the overseas deal between Vodafone International Holdings and Hutchison Group for its assets in Hutch Essar (now known as Vodafone).

The government has filed a review petition on the decision. Through the $11.2-billion deal in May 2007, Vodafone had acquired 67 per cent stake in the Hutchison-Essar Ltd (HEL) from Hong Kong-based Hutchison Group through companies based in the Netherlands and Cayman Island.

As such, the government proposes to amend the Income Tax Act saying overseas transactions will be taxed if the share or interest derives directly or indirectly its value substantially from the assets located in India.