‘Retrospective tax’: Vedanta withdraws all cases against Centre

Tribune News Service
New Delhi, December 13

Vedanta on Monday stated that it has no proceedings nor will it initiate any claim against the government after receiving “Form-II’’ that will refund the tax collected to enforce the retrospective tax demand.

Following the issuance of Form-II, Vedanta has withdrawn the income tax appeal before the Delhi Bench of the IT Appellate Tribunal, the writ petition before the Delhi High Court and the arbitral proceedings before the Permanent Court for Arbitration in the International Court of Justice, said a company statement.

The move follows Parliament approving amendments to the IT Act in the previous Monsoon Session to end retrospective taxation imposed on companies before May 2012.

Companies will also be refunded tax collected under this head if they withdraw cases against the government. The government had argued that scrapping this retrospective taxation was necessary to have a stable and predictable tax regime to promote private investment at a time when geopolitical tensions are compelling many MNCs to shift their factories from China to other countries.

‘The Taxation Laws (Amendment) Act, 2021’ aims to refund 17 companies including the two big ones – Vodafone and Cairns (Now Vedanta). The Vodafone case is being settled through another route.

Vedanta and its group companies have submitted Form 1 and the government then issued Form 2, leading to the withdrawal of the cases, said the company statement.

It all began in 2007, when Vodafone acquired Hutchison Essar and declined to pay a huge income tax demand on grounds that the deal did not take place in India.

Vodafone was finally given relief by the Supreme Court which ruled that a deal executed in Cayman Islands could not be taxed. In response, the then UPA government changed the IT Act to tax overseas transactions if the underlying asset was located in India.

This change was made retrospectively applicable from 1962, hence the shorthand ‘retrospective tax’. It also brought into a total of 17 companies who will all be eligible for relief.