The government notified the rules to resolve the retro tax dispute.
The government has notified new rules to facilitate settlement of disputes related to retrospective taxation with UK telecommunications company Vodafone Plc. The Central Board of Direct Taxes (CBDT) on October 13 notified the ‘Relaxation of Validity (Section 119 of the Finance Act, 2012) Rules, 2021’, containing the forms for declaration to be filed by a company to settle its case and The conditions have been set.
After enacting a law to quash any tax demand levied on companies using the controversial 2012 amendment to the Income Tax Act, the government on October 2 notified rules to deal with such cases. The government has promised to refund any tax collected using such a law without interest, but after the companies agree to withdraw all pending legal proceedings.
All legal proceedings against the government will have to be withdrawn
Under the notified rules, companies are required to submit a declaration to the Income Tax Department about withdrawal of all legal proceedings against the government for collection of retrospectively levied taxes. At the same time, they will also need to give an undertaking that they will not seek any damages and indemnity to the government for future claims.
Retrospective tax was introduced in 2012
The first list of rules, released earlier this month, applies to companies such as British energy giant Cairn Energy Plc, which were taxed after a 2012 amendment. These taxes were demanded using Section 9 of the 2012 Act.
11218 crores were demanded from Vodafone
The case with Vodafone is different as the taxes were demanded from the company by validating the Income Tax Department’s October 2010 order. The order sought tax of Rs 11,218 crore from Vodafone for the acquisition of Hutch-Essar through a deal in the Cayman Islands in 2007.
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