Days after bringing in the Taxation Laws (Amendment) Act 2021 - which scraps the rule that empowered the government to retrospectively (going as far back as 50 years) impose capital gains tax on assets located in the country but whose ownership had changed abroad - the Centre has released draft rules for the legislation.
The draft rules say that the government will not proceed with demands related to retrospective tax levy, provided that all companies with which such cases had been taken up, give an undertaking that they will withdraw all legal cases against it and will not pursue them in the future as well.
With this development, all the retrospective tax demand cases with companies like Cairn Energy and Vodafone Plc, in which the Centre was involved, will come to a close.
Under the retrospective tax rule, the government had levied around Rs one lakh crore from around 17 companies, including the ones mentioned above.
"The amendment made by 2021 Act also provides that the demand raised for offshore indirect transfer of Indian assets made before May 28, 2012 (including the validation of demand provided under Section 119 of the Finance Act 2012) shall be nullified on fulfillment of specified conditions such as withdrawal or furnishing of undertaking for withdrawal of pending litigation and furnishing of an undertaking to the effect that no claim for cost, damages and interest shall be filed and such other conditions are fulfilled as may be prescribed. The amount paid or collected in these cases shall be refunded, without any interest, on fulfillment of the said conditions," a statement issued by the Finance Ministry said.
The government has sought comments from stakeholders on the draft rules by September 4, 2021.