Taxation Laws (Amendment) Act 2021

Central Government notified the Taxation Law Amendments Act, 2021 to repeal the contentious ‘Retrospective Tax’ brought by Finance Act 2012.

Aim

• It aims to bring tax certainty and ensure that once specified conditions are fulfilled, the pending Income-tax proceedings shall be withdrawn; demand, if any, raised shall be nullified; and amount, if any, collected shall be refunded to the taxpayer without any interest.
• With this amendment, the government is aiming to settle retrospective tax disputes with Cairn Energy and the Vodafone Group.

Key Features

• Provides that no tax demand shall be raised in the future based on the retrospective amendment made through Finance Act, 2012, for any indirect transfer of Indian assets if the transaction was undertaken before 28th May 2012.
• Provides that the demand raised for indirect transfer of Indian assets made before 28th May 2012, shall be nullified on fulfillment of specified conditions and on furnishing of an undertaking.
• Provides to refund the amount paid in these cases without any interest thereon.
• Amends the Finance Act, 2012 so as to provide that the validation of demand, etc, under section 119 of the Finance Act, 2012 shall cease to apply on fulfilment of specified conditions and on furnishing of an undertaking.
• Empowers CBDT to make rules to provide the form and manner in which an undertaking shall be submitted.

Impact

It will allow cordial settlement of various tax disputes that arose from retrospective use of an anti-evasion provision introduced in 2012.

• It will increase the confidence of foreign investors in Indian economy.