Retrospective amendment in I-T laws will not impact FDI: Pranab Mukherjee

NEW DELHI: The government today said retrospective amendment to the Income Tax Act will not have any adverse impact on foreign investment in the country.

"Since the amendments just clarify what is already there in law to remove ambiguity and provide certainty, it is not expected to have any adverse impact on foreign investment flow in the country," Finance Minister Pranab Mukherjee said in a written reply to the Rajya Sabha.

"This is more so because these clarifications under the Income Tax Act, 1961, will not override the provisions of Double Taxation Avoidance Agreements with 82 countries," he said.

Mukherjee also said that representations have been received from various persons, including some foreign governments, regarding retrospective amendments to the Income Tax Act.

The Lok Sabha has approved the Finance Bill, 2012 which seeks to amend the Income Tax Act, 1961, with retrospective effect to tax overseas deals involving domestic assets.

The amendment would neutralise the victory secured by Vodafone in the Supreme Court in the Rs 11,000-crore tax dispute case.

The tax pertains to purchase of Hutchison's stake in Hutchison-Essar by Vodafone for USD 11.2 billion in 2007 through a deal in Cayman Islands.

The tax liability of Vodafone, after taking into account the penalty and interest is estimated at Rs 20,300 crore.