New Delhi, July 10 (IANS): Finance Minister Arun Jaitley Thursday said retrospective taxation, which evoked much criticism from domestic and overseas investors, notably Britain's Vodafone, remained any sovereign government's prerogative but assured that India will not resort to it randomly.
“The sovereign right of the government to undertake retrospective legislation is unquestionable,” the finance minister said during the course of his two-hour budget speech in the Lok Sabha.
“However, this power has to be exercised with extreme caution and judiciousness, keeping in mind the impact of each such measure on the economy and the overall investment climate,” he said.
“This government will not ordinarily bring about any change retrospectively which creates a fresh liability.”
The finance minister acknowledged that after some retrospective amendments to the Income Tax Act, 1961, in 2012, a few cases had come up in various courts and other legal arenas, which are awaiting verdicts.
“At this juncture I would like to convey to this august house and also the investors community at large that we are committed to provide a stable and predictable taxation regime that would be investor friendly and spur growth.”
He said all fresh cases of retrospective amendments in indirect transfers and coming to the notice of the assessing officers will be scrutinised by a high level tax committee before any action is initiated in such cases.
“I hope the investor community both within India and abroad would repose confidence on our stated position and participate in the Indian growth story with renewed vigour.”
Reacting to Jaitley's comments, Vodafone, which was slapped with a Rs.20,000 crore retrospective capital gains tax after it acquired the telecom assets of an Indian company in 2007, said it will continue with the ongoing international arbitration to resolve the dispute.
"We note the finance minister's announcement that existing cases arising from the 2012 retrospective tax law should follow the lawful process in which they are currently being adjudicated,” the company said in a statement.
“Vodafone will, therefore, continue the process of international arbitration initiated under the India-Netherlands Bilateral Investment Treaty."