Shome committee could provide way to settle Vodafone case

The Partho Shome headed high-level expert panel has said the the retrospective amendment in the tax laws making overseas indirect transfers of assets taxable in India be reversed to be applied prospectively.

The panel has also said there should no levy of interest or penalty on if tax is levied retrospectively. This could clearly mean reprieve for British telecom major Vodafone.

The panel has also said any other form of restructuring within the group or associated enterprises subject to continuity of 100% ownership in case of any indirect transfer should be outside the scope of the law .

It also says that the word "substantially" should be defined as a threshold of 50% of the total value derived from assets of the company or entity, as proposed in Direct Taxes Code Bill 2010.

In other words, a capital asset being any share or interest in a company or entity registered or incorporated outside India shall be deemed to be situated in India, if the share or interest derives, directly or indirectly, its value from the assets located in India being more than 50% of the global assets of such company or entity. If the value is less then such indirect transfer of Indian assets should not be taxed.