Government defends retrospective tax change

NEW DELHI: The government has stoutly defended the retrospective change in income tax law which will give powers to authorities to tax crossborder transactions wherein the underlying asset is located in India.

“On the issue of Vodafone...this is the legislature saying that this was its intent always... It is not that the intent has changed now-...Such transactions were always to be subjected to tax,” said finance secretary RS Gujral at a CII post-budget interaction.

Gujral said Indian industry should keep in mind that India as a country was a not a tax haven but genuinely addressed issues of double taxation.

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“We are all Indian… If a foreign company sells Indian business to another foreign company and then says I do not have to pay tax then I don’t think it is an acceptable thing…We also want certainty in tax matters...” he said.

“...The Bombay High Court had given a verdict in government’s favour and if this clarification had come then your reaction would have been different,” he said. The government does not have a policy of no tax but if there is an issue of double taxation then the government will address it. India Inc has warned the retrospective change in law could impact flow of foreign capital by creating uncertainty around tax treatment.

Defending the amendment finance minister Pranab Mukherjee on Sunday said that the amendment may have been done from retrospective basis but incometax authorities could not reopen any tax case beyond six years as per law and this would prevail.