The controversial move to amend the IT Act with retrospective effect from 1962 to cover overseas mergers and acquisitions was not Vodafone-specific, Finance Minister Pranab Mukherjee made it clear on Sunday.
Mr. Mukherjee’s proposal in the budget presented two days ago to retrospectively amend the law with effect from April, 1962 to tax deals involving overseas companies that have interests in India has generated criticism with some suggesting that it would impact investments into the country.
The move comes against the backdrop of the Supreme Court order that has held that the USD 12 billion deal between British telecom giant Vodafone and Hutchison was not liable to tax in India, rejecting the IT department’s demand for Rs. 10,000 crore tax.
Affirming that the amendment was not Vodafone-specific, the Finance Minister said that the move was not merely to prevent erosion of revenues in present cases but also to prevent the outgo of revenues in old cases.
Illustrating the point, Mr. Mukherjee said that suppose the government had collected taxes in such cases during the last 10 years and did nothing after the Supreme Court judgement, companies would demand refund of the tax paid by them.
Asked if there was any assessment of the likely liability on this account if the law was not amended, the Minister replied, “that is difficult. Somebody was telling me (it is) about Rs. 30,000 crore to Rs. 40,000 crore.”