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Govt attempt to tax Vodafone- like deals

05:04 AM Jun 02, 2019 |

FPJ NEWS SERVICE New Delhi

In a measure that will have far- reaching impact on foreign investment and the Vodafone case, which has a tax implication of Rs 11,000 crore, the government on Friday proposed an amendment in the Income T

ax Act, seeking to tax such deals retrospectively from April 1, 1962.

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Under the proposed amendment, all persons, whether resident or non- resident, 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.

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The amendment will apply to all past transactions concerning assets in India. This amendment essentially seeks to overturn the ruling of the Supreme Court judgment in two cases— Vodafone and Azadi Bachao Andolan.

In the Vodafone case, the apex court had ruled that the British telecom giant does not have to pay taxes and penalties for a transaction that saw the company acquire 67 per cent stake in Hutchison Essar, a mobile phone operator in India in 2007. The deal was for Rs 55,000 crore.

The Supreme Court had said that Indian tax officials do not have jurisdiction over a deal between two global companies, even if the assets involved in that deal are located in India. It had also said that the Vodafone tax case was an ‘eye- opener’for Indian legislature to take measures to meet such unprecedented situations which arise due to ‘what we lack in our regulatory laws’. In the Azadi Bachao Andolan case, it was held that an entity having a tax remittance certificate from Mauritius would be exempt from paying tax in India.

The changes in the Income Tax Act, according to experts, will also have a bearing on about 500 overseas deals of similar kind.

In a quick response to the governments move, the UK- based telecom major said it has begun consultations with lawyers on the issue.

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