PM in charge,govt will ‘look afresh’ at retro tax

The broad message from the PM’s meeting with all secretaries of the ministry was that the government intends to put the Vodafone dispute on the back burner and focus on macro-economic issues to improve India’s image as an investor-friendly destination,the official told The Indian Express.

No overt retraction would,however,be made,because any official announcement that conveys a dilution of the government’s stance could potentially embarrass former finance minister Pranab Mukherjee before the presidential election,it was felt.

Income-tax officials said the government was also likely to wait and watch out for a verdict on the Mcleod Russel (India) Ltd case,where the Kolkata-based firm — the world’s largest tea plantation company — moved the high court last month challenging the “constitutional validity” of the retrospective amendments announced in Budget 2012-13.

The officials said it would be helpful to have a degree of clarity on the legal challenge by Mcleod Russel to the amendments moved in the finance Bill.

“Sending a demand notice (to Vodafone) will be premature because there are many defences for Vodafone right now. They have won in the Supreme Court… retrospective amendment has been challenged in the Calcutta High Court… The issue of sending notice is in abeyance for now,” an official said.

The amendments announced in the budget by Mukherjee aimed at retrospectively bringing into the tax net deals such as Vodafone,and drew heavy fire from investors,global firms and foreign governments. Though Vodafone won the tax case against I-T in the Supreme Court in January,the amendments would have helped the government tax the company retrospectively.

Finance Secretary R S Gujral said today that the PMO has sought clarity on certain tax issues. “Prime Minister’s Office has sought clarifications on taxation issues and Section 9 of Income-Tax Act (indirect transfer of assets)… We asked them to give us two-three weeks’ time.”

The finance secretary ruled out deferment of the general anti-avoidance rules (GAAR) beyond 2013. GAAR too had spooked investors,following which the government had postponed the roll-out of the tax rules from April 1,2012 to the beginning of the 2013-14 fiscal.

Gujral said draft guidelines on GAAR would be issued shortly for public comment.