In the Vodafone tax case, the Supreme Court gave the verdict that the imposition of tax should be explicit in tax laws. This vindicated our claim that foreigners trusted India's judicial system. The income tax Act has been amended and made explicit. But doing so, with retrospective effect, trampled the verdict. The charge of denial of justice to the foreigners has harmed India economically also. Laws with retrospective effect should be made to provide relief or, at most, to increase the penalty or punishment. But this time it was made to indict someone who was not guilty at the time of commission, and this created an ominous precedence. Nobody has challenged the judgment so far. Alas, the Supreme Court has to remain silent until the issue is brought to it officially.
The liability of tax on transfer of Indian assets between foreign parties, with consideration in foreign currency, was not made explicit by the authors of the original draft Act. Did the realisation of this omission prompt the administrative action on Vodafone?
Any opposition to the retrospective action ran the risk of being branded an "agent of the rich" and "anti-poor". Did political pragmatism prevail over the sense of justice and economic pragmatism? The requirement of foreign capital and helplessness of the foreign investors have now been understood. But the magnitude of risk and the lack of remedy feared by foreign investors, and its effect on the economy did not get due consideration from the lawmakers.
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The liability of tax on transfer of Indian assets between foreign parties, with consideration in foreign currency, was not made explicit by the authors of the original draft Act. Did the realisation of this omission prompt the administrative action on Vodafone?
Any opposition to the retrospective action ran the risk of being branded an "agent of the rich" and "anti-poor". Did political pragmatism prevail over the sense of justice and economic pragmatism? The requirement of foreign capital and helplessness of the foreign investors have now been understood. But the magnitude of risk and the lack of remedy feared by foreign investors, and its effect on the economy did not get due consideration from the lawmakers.
Minati Roy Bokaro Steel City
Letters can be mailed, faxed or e-mailed to:
The Editor, Business Standard
Nehru House, 4 Bahadur Shah Zafar Marg
New Delhi 110 002
Fax: (011) 23720201
E-mail: letters@bsmail.in
All letters must have a postal address and telephone number