Budget 2014: Move to handle Retro tax amendment with caution a good one, says Rahul Garg of PwC India

NEW DELHI: Finance Minister Arun Jaitley's approach of handling retrospective amendments to tax laws with extreme caution has strengthened the investor confidence in the economy, said Rahul Garg, Leader Direct Tax, PwC India.

"The announcement that the government will not introduce any retro amendment and mechanism to issue clarification on grey areas will certainly go a long way to bring clarity and certainty on such issues and reduce tax litigation," said Garg.

According the expert from PwC, "Setting up high level committee to review the cases arising on account of indirect transfer, would be balanced to protect the interest of Revenue as well as Investors if the guidelines are embeded in law providing the basis on which such transaction need to be examined."

Further, extending advance ruling route for resident tax payer is another welcome route and will surely reduce tax disputes, Rahul Garg said.



Jaitley had said all fresh cases arising out of the 2012 amendment of I-T Act will be looked into by a high level CBDT committee.

However, the existing tax disputes, arising out of Retrospective Amendment to the Income tax Act, 1961, and are pending in Courts, will be allowed to reach their logical conclusions, he said.

"The sovereign right of the government to undertake retrospective legislation in unquestionable. However, this power has to be exercised through extreme caution and judiciousness keeping in mind the impact of each such measure on the economy and the overall investment climate.

"This govt will not ordinarily bring any change retrospectively which creates a fresh liability," Jaitley said while presenting the Budget for 2014-15.

He said consequent upon the retrospective amendment of the I-T Act, 1961, undertaken by Finance Bill of 2012, a few cases have come up in various courts and legal fora.
"These cases are at various stages of pendency and will naturally reach their logical conclusion," he said.

He said the BJP-led NDA government is committed to providing a stable and predictable taxable regime which would be investor friendly and spur growth.
(With inputs from PTI)