NEW DELHI: Finance Minister Pranab Mukherjee on Friday told Lok Sabha the retrospective amendments to the tax laws proposed in the Budget will not have any impact on foreign investment, just after the new US ambassador to India raised the issue at a business function.
The proposed amendments will not override the provisions of the Double Taxation Avoidance Agreements with 82 countries, the finance minister said.
Proposed amendments ‘just clarify’ what is already there in law to remove ambiguity and provide certainty, he said even as the US raised the issue again.
“… it will not have any impact on foreign investment flow in the country. This is more so because these clarifications … will not override the provisions of Double Taxation Avoidance Agreements with 82 countries…,” Mr Mukherjee said.
The Finance Bill, 2012, has proposed amendments to state the legislative ‘intent’ of certain provisions of the Income-tax Act, 1961, relating to offshore mergers and acquisitions that result in transfer of Indian assets.
The proposal once passed by Parliament will give the government power to renew its Rs 11,000 crore tax demand on Vodafone for its acquisition of majority stake in Hutchison Essar from Hutchison in a $11.2 billion deal offshore deal in May 2007. The SC had set aside I-T department’s demand for the tax.
The retrospective change in the law has evoked strong criticism from foreign investors and many global trade bodies.
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