A very interesting article by Menaka Doshi on firstpost.com, which points to an extremely worrisome attitude displayed by the government in the Vodafone case. Try reading what apparently is the Item 113 of the Finance Bill tabled by Finance Minister Pranab Mukherjee. Decide for yourself and make your own opinion:

The reason why it [Vodafone] may not get its money back lies in Item 113 of the Finance Bill. The item, criticised for its breathless length, is harsher in what it attempts to do. It is draconian and pointed mostly at Vodafone. It seeks to deny any refunds to Vodafone and the like, irrespective of any court order. Here try reading it

113. Notwithstanding anything contained in any judgment, decree or order of any Court or Tribunal or any authority, all notices sent or purporting to have been sent, or taxes levied, demanded, assessed, imposed, collected or recovered or purporting to have been levied, demanded, assessed, imposed, collected or recovered under the provisions of Income-tax Act, 1961, in respect of income accruing or arising through or from the transfer of a capital asset situated in India in consequence of the transfer of a share or shares of a company registered or incorporated outside India or in consequence of an agreement, or otherwise, outside
India, shall be deemed to have been validly made, and the notice, levy, demand, assessment, imposition, collection or recovery of tax shall be valid and shall be deemed always to have been valid and shall not be called in question on the ground that the tax was not chargeable or any ground including that it is a tax on capital gains arising out of transactions which have taken place outside India, and accordingly, any tax levied, demanded, assessed, imposed or deposited before the commencement of this Act and chargeable for a period prior to such commencement but not collected or recovered before such commencement, may be collected or recovered and appropriated in accordance with the provisions of the Income-tax Act, 1961 as amended by this Act, and the rules made there under and there shall be no liability or obligation to make any refund whatsoever.

Well known Chartered Accountant T P Oswal says if 113 comes into force Vodafone will be denied any refund. Unless it challenges 113 in court and wins, Vodafone may have to bid adieu to the Rs 2,500 crore deposited with the Income Tax Department.

If such a regulation ever comes into force we may well have to ask ourselves some tough questions about the governance in India and the (dis-)regard that the government seems to have for a free and fair judicial system… The issue at stake is not the actual or supposed tax liability of any individual company but the fact that the government apparently does not shy away from using retrospective amendments to hollow out judicial verdicts while refusing to refund money despite court orders. The very idea to take decisions of tax authorities away from the purview of courts of law seems to be highly questionable and may even be seen as undemocratic.

Doshi concludes with these words:

But the bigger worry is the number of retrospective amendments in this Finance Bill. More than 20! Through these the Government is trying to invalidate a score of important tax judgments it has lost in the past few years. What message does this send to the tax payer? That it is pointless to honestly argue your tax position in a court of law because a win may mean nothing. And then we wonder why so many Indians and Indian businesses are always looking for a ‘way out’ or some manner in which to ‘influence’ tax policy and implementation!

Source:

Menaka Doshi: „Will Vodafone ever get its money back?„, 19.03.2012, accessed: 20.03.2012.

Note: Menaka Doshi is the corporate editor, CNBC-TV18.

Further readings:

• Budget 2012: Powers given to tax authorities could spark a face-off b/w corporates & govt (Economic Times, 20.03.2012)
• Govt’s proposed new tax rules reopen raw wounds (Reuters, 20.03.2012)
• Vodafone Tax Case: Supreme Court dismisses govt’s review plea (Economic Times, 20.03.2012)
• Clarificatory amendment or fig leaf? (article by Harish Salve, a former Solicitor General of India and counsel for Vodafone, in The Financial Express, 20.03.2012)