Retro tax: the government publishes draft rules for the settlement of disputes
This would be in addition to their own commitment to withdraw any pending litigation or proceeding in any forum and the assurance that they will not pursue any further claims in the future.
The government on Saturday released draft rules for implementing the 2021 Tax Laws (Amendment) Act passed earlier this month to deal with retroactive tax cases. He has requested comments by September 4 on the proposed rules, after which they will be officially notified.
The statement by all interested parties is intended to protect government and government entities from any future claims by stakeholders other than these companies, such as direct or indirect shareholders or any other beneficial owner in any global forum.
“Open to changes”
âThe draft forms also contemplate a situation in which a separate interested party, such as direct or indirect shareholders, or any other beneficial owner of the taxpayer in the case of which this proceeding is pending, may bring or lodge a claim against the taxpayer. republic or Indian affiliates at all after filing the undertaking, âsaid Sandeep Jhunjhunwala, partner at Nangia Andersen LLP. “In such cases, the taxpayer is obligated to indemnify and defend the Republic or Indian affiliates against all charges.”
A senior official told ET that the government would be open to any rule changes to address concerns any business might have. Any dispute regarding forms or orders prescribed under these rules would be governed by Indian laws and local courts would have exclusive jurisdiction to resolve disputes. âThe aim of the change made by the 2021 law is to provide tax security and ensure that once the specified conditions are met, the pending income tax procedure will be withdrawn, the application, the case if applicable, will be canceled and the amount collected, if any, will be refunded to the taxpayer without any interest, âthe Central Commission for Direct Taxes (CBDT) said on Saturday in a statement when the proposed rules were published.
India passed a law removing the retrospective provision of the Income Tax Law to tax the indirect transfer of assets, canceling requests made on transactions before May 28, 2012, the date of entry into force. The amendment adopted during the monsoon session of Parliament provides for a mechanism for resolving disputes, including in international forums, with Cairn Energy, Vodafone and 15 others. The law provides that the government will withdraw all tax claims levied retroactively and refund the taxes collected, without interest or penalty, to settle the matter if companies withdraw filed legal challenges.
The rules propose to allow up to 45 days from the date of notification for litigants to provide a settlement commitment, and up to 15 days after submission for tax officials to accept or reject the commitment. All contentious, arbitration and enforcement proceedings must be withdrawn within 60 days of acceptance of the undertaking.