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Hague court cites statements by Modi, Jaitley to overturn Rs 10okay crore tax demand from Cairn – Business News , Firstpost


In 2016, the prime minister was quoted by the Financial Times as saying that the federal government ‘is not going to resort to retrospective taxation; we’re making our tax regime clear, steady and predictable’

Representational Image. News18

New Delhi: A 3-member tribunal on the Permanent Court of Arbitration in The Hague cited statements by Prime Minister Narendra Modi and different ministers pledging not to use retrospective taxation to overturn a Rs 10,247 crore tax demand on British oil and fuel firm Cairn Energy Plc.

The tribunal, in a 582-page judgment on 21 December, ordered the return of the worth of shares that the Income Tax Department bought as additionally the dividend it seized and tax refunds it withheld to get well tax demand that was levied following the 2012 modification to the Income Tax Act that gave authorities powers to search taxes on previous offers.

It dominated that the 2006 reorganisation of Cairn Energy’s India enterprise prior to itemizing on native bourses was not “unlawful tax avoidance” and ordered tax authorities to drop the tax demand.

In the order, the tribunal, which consisted of 1 member appointed by the Indian authorities, stated the Bharatiya Janata Party’s (BJP) 2014 “election manifesto criticised the preceding government for having unleashed ‘tax terrorism’ and ‘uncertainty’, which ‘negatively impact[ed] the investment climate’.”

In his first price range speech in July 2014, then finance minister Arun Jaitley proposed {that a} CBDT-supervised ‘High-Level Committee’ be applied to scrutinise contemporary circumstances that had arisen following the 2012 Amendments.

After stating that, “[t]his government will not ordinarily bring about any change retrospectively which creates a fresh liability”, he introduced that “henceforth, all fresh cases arising out of the retrospective amendments of 2012 in respect of indirect transfers and coming to the notice of the Assessing Officers will be scrutinized by a High Level Committee to be constituted by the CBDT before any action is initiated in such cases,” the order stated.

On 7 November, 2014, Jaitley, in accordance to the order, insisted that his authorities had taken a “policy decision that as far as this government is concerned [] even though there is a sovereign power of retrospective taxation, we are not going to exercise that power”.

On 13 January, 2015, Jaitley was quoted as saying that the 2012 Amendment had “scared away investors from India” and that “the government had no intention of using the retrospective tax provision”.

“This view was confirmed by Prime Minister Narendra Modi onĀ  14 February, 2016. The prime minister was quoted in the Financial Times as saying that the government “is not going to resort to retrospective taxation; we’re making our tax regime clear, steady and predictable”, the tribunal stated.

The Income Tax Department in 2015 slapped a Rs 10,247 crore tax demand on Cairn for alleged capital features it made within the 2006 enterprise reorganisation. Cairn denied the scheme, averted any tax that have been prevalent on that date and challenged the demand by means of an arbitration.

During the pendency of the arbitration, the federal government bought Cairn’s close to 5 p.c holding in Vedanta Ltd, seized dividends totalling Rs 1,140 crore due to it from these shareholdings and set off a Rs 1,590-crore tax refund in opposition to the demand.

The tribunal ordered the federal government to return the worth of shares it had bought, dividends seized and tax refunds withheld to get well the tax demand together with curiosity. Also, it was requested to reimburse the price of arbitration. All this totalled to $1.25 billion plus curiosity.

The authorities in response to the arbitration award had said that it’ll research the order and “will consider all options and take a decision on the further course of action, including legal remedies before appropriate fora”.

This is the second loss the federal government has suffered in three months over the retrospective levy of taxes. In September, UK’s Vodafone Group received a global arbitration in opposition to the demand of Rs 22,100 crore in taxes.

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