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Govt to retrospectively tax Vodafone deal

BT Online Bureau     March 16, 2012
In a significant move that will have implications in the Vodafone and other cases involving tax liability of about Rs 40,000 crore, the government on Friday proposed to amend the IT Act with effect from 1962 to bring under net all overseas transactions involving domestic assets.

Under the proposed amendment, to come into effect from April 1, 1962 all persons, whether resident or non-residents, having business connection in India will be required to deduct tax at source and pay it to the government even if the transaction is executed on a foreign soil.

"There are large number of similar (Vodafone type) cases which, could be impacted. Our rough assessment is that total impact of such cases would have been to the tune of Rs 35,000-Rs 40,000 crore", Revenue Secretary R S Gujral said.


The position of the government, he said, "is that the intention of the legislature on the initial stage was very clear that the transaction like the Vodafone, are subject to taxation in India.

"When the underlying assets are in India, they are subject to tax in India...The amendment is only a clarification. It is reiterating of the original intent of legislation," he said.

The amendment will apply to all past transactions concerning assets in India.

In the Vodafone case, the Supreme Court had held that the Income Tax department does not have the jurisdiction to levy Rs 11,000 crore as withholding tax on Vodafone for its $11 billion acquisition deal with Hutchison Essar in 2007.

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