Parthasarathi Shome panel submits report on taxing indirect transfers

A panel-headed by leading tax expert Parthasarathi Shome on taxation of indirect transfer involving Indian assets has submitted its final recommendations to finance minister P Chidambaram, raising expectations of an expeditious decision on the issue that unnerved foreign investors.

Finance minister P Chidambaram has already made it clear that Vodafone’s tax matter would be decided after considering all aspects including recommendations of the Shome Committee.

The government amended the tax laws in this year’s budget retrospectively allowing tax authorities to tax overseas indirect transfers involving underlying Indian assets, virtually nullifying the Supreme Court decision that said the Vodafone’s $11.2 bilion acquisition of Hucthison Essar was not taxable in India.

Subsequently, the government had asked the Shome committee, which was already looking into another budget proposal, the GAAR, to also review the provisions relating to indirect transfers.