Lok Sabha clears Bill to end retrospective tax, Congress backs move

A Bill to end all retrospective taxation imposed on indirect transfer of Indian assets was passed by the Lok Sabha on Friday even as the Opposition continued protests against the alleged snooping through the Pegasus spyware and other issues. The government’s move to scrap the tax law, however, found support from an unlikely corner — the Congress.
 
Union Finance Minister Nirmala Sitharaman described the 2012 legislation as “bad in law and bad for the investors’ sentiments” and said there were 17 litigations due to the retrospective tax law and even the Supreme Court had said in 2012 that the tax could not be levied for indirect transfer of shares of foreign companies.

 
“The Bill has been brought as a clarification,” she said.
 

Rajendra Agrawal, who was in the chair, declared the Bill passed after clause-wise discussions of the Bill and a brief statement by Sitharaman.
 
Sitharaman said in 2014 the then Finance Minister Arun Jaitley had made a commitment to set up a high-powered committee to look into the provisions of the 2012 law as the NDA government did not believe in retrospective taxes.
 
Backing the government’s move, former Union Finance Minister P Chidambaram tweeted, “I am glad that we have put an end to an issue that has been troubling us for eight years”, underlining that the party was turning its back on a tax provision that it had introduced. The BJP has been in power for seven years.

 
On Friday, the Lok Sabha witnessed continuous protests by the Opposition and if it had been business as usual in Parliament, the Congress might have been forced to side with the government in rejecting a Budget provision introduced by its own Finance Minister, Pranab Mukherjee.
 
Mukherjee acknowledged freely that when he made the proposal in the 2012 Budget, his entire party was opposed to it.
 
Mukherjee wrote in his memoirs that “Manmohan Singh was convinced that the proposed (retrospective tax) amendment in the IT Act would impact FDI inflows into the country. I explained to him that India was not a ‘no-tax’ or ‘low-tax’ country. Here all taxpayers, whether resident or non-resident, are treated equally. I insisted that as per our country’s tax laws, if you pay tax in one country, you need not pay tax in the other country of your business operation which is covered by the Double Tax Avoidance Agreement (DTAA). But it cannot be a case that you pay no tax at all. I clarified that some entities had done their tax planning in such a way that they didn’t have to pay tax at all. My intention was clear: where assets are created in one country, it will have to be taxed by that country unless it is covered by the DTAA.”

 
He added party president Sonia Gandhi, and ministers Kapil Sibal and P Chidambaram also expressed the apprehension that the retrospective amendments would create a negative sentiment for FDI.
 
With inputs from PTI