Government gets crucial extension in McLeod Russel tax case

The Calcutta High Court has granted 6 additional weeks to the government to file its response in the ongoing McLeod Russel tax case. The government has been directed to submit its written response by 21st September and the court will hear the case on October 3. The court also extended its interim order to 30th November which restricts any lower appellate forum from hearing McLeod Russel's appeal. McLeod Russel is the first and only Indian corporate to challenge the government's retrospective tax laws introduced in budget 2012. It has filed a writ petition at the Calcutta High Court alleging that the retrospective amendments to tax laws are unconstitutional and arbitrary.

Tax experts say the government's response in the McLeod Russel case is hugely significant as it would represent the first official legal response from the government on the controversial retrospective tax laws introduced in budget 2012 and would also provide much needed clarity to foreign investors on India's tax policy. " The Finance Ministry is mulling several options to soften the blow of the retrospective tax laws and the extension from the court is welcome as it gives more time to the government to take legal opinion and finalise its strategy," said a senior government official familiar.

The retrospective amendments to tax laws lead to a massive outcry in India Inc as they proposed to bring Vodafone-type deals under the tax net. In 2007, the UK-based telecom giant acquired firm Hutchison's stake in Hutchison Essar Ltd for $ 11 billion dollars which lead to the tax department raising a tax demand of Rs 12,000 crore rupees. In January 2012, the Supreme Court ruled that Indian income tax authorities had no jurisdiction over the deal. But the retrospective amendments introduced in budget 2012 had the effect of overturning the apex court verdict.