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    Default Pranab reassures US on tax moves

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    Amid growing criticism from various quarters over the proposed retrospective changes in the tax law, Finance Minister Pranab Mukherjee has said that changes in the legislation would be just "clarificatory" in nature.

    During his meeting with the US Treasury Secretary Timothy Giethner on Thursday, Mukherjee clarified that the proposed legislation was not aimed at opening up old cases.

    According to an official statement released after the meeting, the US treasury secretary raised the issue of the proposed tax amendment during the meeting.

    In this regard, Mukherjee informed that the tax changes proposed are not substantive but clarificatory in nature as the changes reiterated only the intent of the legislation, a finance ministry statement said.

    During the meeting, Mukherjee pointed out that as per the provisions of the Income Tax Act, 1961, no tax case can be opened beyond six years.

    In the union budget for 2012-13 last month, Mukherjee proposed to amend the Income Tax Act retrospectively to allow authorities to tax global merger and acquisition transactions involving Indian assets and shares.

    The proposed amendment is seen as a tool to bring under tax net the overseas transactions like Vodafone-Hutchison.

    The Supreme Court recently rejected the IT department's Rs.11,000 crore ($2.2 billion) tax demand on $11 billion Vodafone-Hutchison deal saying Indian tax authorities do not have jurisdiction over overseas transactions.

    The finance minister clarified that the "tax cases which have already been assessed and finalised up to April 1, 2012 cannot be reopened".

    "Indian tax laws are very clear that the companies making capital gains from the assets located in India will have to pay taxes either in the country of their origin or in India. It is not a case of double taxation but ensuring that companies that are liable to pay tax must pay some tax," the finance ministry said.

 

 

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