17 companies benefit from govt’s change in stand on retrospective taxation

Couple of weeks after the Income-Tax (I-T) Act was amended to junk the contentious retrospective taxation provision, the government is reaching out to 17 affected companies to withdraw cases from various judicial levels and derive the benefit of the legal correction. The
government has made the first move and offered to settle the retrospective cases because it would be a fresh challenge if these companies decide not to withdraw cases pertaining to the 2012 legislation on the indirect transfer of Indian assets.

The rules under the Taxation Laws (Amendment) Act, 2021, are expected this week. The government has collected about ~8,000 crore from three of the 17 companies — ~7,900 crore from Cairn Energy, ~44.7 crore from Vodafone, and ~48 crore from WNS Capital — which it has proposed to refund on certain conditions getting fulfilled, including withdrawing pending litigation and furnishing an undertaking that no claim for cost, damages, interest, etc. would be filed.

This condition is part of the Taxation Laws (Amendment) Bill, 2021, passed by Parliament in the monsoon session. Government officials had earlier said, now that the legislation to remove retrospective taxation was in place, it was for the companies to reach out to the government and settle these cases. However, last week Central Board of Direct Taxes
(CBDT) Chairman J B Mohapatra wrote to the jurisdictional officers — the principal chief commissioners of I-T — to approach those cases that were likely to benefit from the new amendments to the retrospective taxation.

“Instead of waiting for the other side to approach the government, the latter is approaching these companies to settle the cases. The government now wants their judicial closure. These cases are a big cost for the government too,” said an official.

In one of the cases, Earlyguard, a British subsidiary of Japanese conglomerate Mitsui & Co., commenced arbitration under the India-UK bilateral investment treaty in May 2021 over the
~2,400-crore tax demand related to a transaction that took place in 2007. The CBDT chairman asked tax officers to identify the eligible cases under the new legislation. A template of the communication for these companies has also been shared with the respective officers. Also, the officers have been asked to send details of the eligible cases and the related arbitration to the board.

“Besides the three companies — Cairn, Vodafone, and WNS Capital — there isn’t much to refund the other players. Therefore, it is on the companies to withdraw cases and do
settlement with the government,” said a government official. Bisiness Standard