Budget 2014: Some middle path will be evolved, says Ketan Dalal of PwC on retrospective taxation

NEW DELHI: Sharing his insight on Finance Minister Arun Jaitley's stand on retrospective taxation, Ketan Dalal, Senior Tax Partner, PwC India said, "There was a widespread expectation regarding neutralisation of the retrospective taxation amendment. However, that has not happened, but at least there has been a clear acknowledgment now that retrospective taxation in future will not be resorted to."

Talking about the pending litigations in this regard Dalal said, "The existing matters in litigation will presumably continue, including the one(s) under arbitration. What has been now announced is that if new cases come up, they will be referred to a high level committee; the composition of the committee and the framework for decision making is unclear at this stage. It seems that there have been constraints in neutralisation of the amendment, but some middle path will be evolved."

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.