On 15th May, the Finance Bill, 2012 as amended by the Lok Sabha was laid before the Rajya Sabha for consideration and returning back to the Lower House, by the Finance Minister.


Responding to the debate in Rajya Sabha on the Finance Bill, 2012 today, the Finance Minister once again defended retrospective changes to the tax law. He assured that while enacting tax legislation, India would honor its International Commitments as well as keep in mind the provisions of DTAAs. In response to BJP MP and Chartered Accountant Mr. Piyush Goyal’s criticism of retro amendments, FM stated that the retrospective amendment by UK in 2008 dating back to 1987 was not grandfathered. Mr. Mukherjee observed that till now every FM had enacted retrospective legislative amendments but only this time, a big hue and cry was raised over it.


The FM stated that many companies accept the interpretation of the Revenue and pay their taxes as directed. He also stated that “If the subsequent legislation does not rectify the interpretation of the SC then I (Revenue) will have to pay Rs 40-50,000 cr and that is not acceptable.”


Lok Sabha has passed the Finance Bill 2012 (as amended) on May 8, 2012, after two days of spirited discussion. Some important provisions of the amended Bill include deferment of GAAR by a year, allowing conversion of branches of foreign banks into subsidiaries, withdrawal of 1% TDS on immoveable property and levying 10% tax on LTCG arising to non-residents, on sale of unlisted securities. The FM also forcefully reiterated (in relation to the Vodafone case) that the Legislature has the right to clarify the intention of the Legislature and correct the Supreme Court’s interpretation.

After the announcement of Union Budget 2012, a great deal of discussion as to its merits and demerits took place. In light of this discussion, we bring to you an analysis of Soli Dastur's Post-Budget Speech. We also bring to you, a summary of the Half-Day Seminar conducted by Western Region Chapter, IFA - India Branch, on the International Tax Aspects of the Budget. The Seminar consisted of eminent personalities in the field of taxation. The Post-Budget discussion is centered mainly on the impact of retrospective amendments made to Sec 9, in respect of indirect transfer and royalty, introduction of General Anti-Avoidance Rules and amendments in relation to Transfer Pricing.

Finance Bill, 2012 has lived up to its hype and has proposed several amendments to the existing Income-tax Act. The Bill proposes over 100 amendments, many which are retrospective in nature, which could have the effect of  overruling quite a few Court and Tribunal decisions.

Taxsutra.com has compiled a list of case-laws that are likely to be overruled if the amendments take effect. 

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Finance Bill, 2012 proposes to introduce General Anti-Avoidance Rules this year, which will majorly impact taxpayers within and outside the Indian border. Though these Rules are new to India, they have been in place since a long time in other countries. With a view to better understand how GAAR works in those countries, Taxsutra team has compiled a comparative note on GAAR provisions prevalent in 8 jurisdictions; Canada, Australia, South Africa, New Zealand, China, Germany, Singapore, US. This compilation also covers proposed GAAR provisions in UK and India.

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Union Budget 2012 has lived up to its hype. The Finance Bill has presented the much anticipated 'big bang' proposals, which are sure to have a significant impact on taxpayers. Taxsutra team has analyzed certain important direct tax amendments, and prepared a summary of the key direct tax proposals in the Finance Bill. 

The Finance Bill has introduced GAAR provisions, which differ from the provisions proposed in the Direct Taxes Code and which effectively nullify the Supreme Court's ruling in Vodafone's case. Finance Bill's GAAR has incorporated provisions to bring within the tax net, Vodafone-like transactions. The Bill also proposes a retrospective amendment to Sec 9, to tax offshore share transfers, which provides that any share or interest in a company outside India deemed to be situated in India if share or interest derives, directly or indirectly, its value substantially from the assets located in India. While simultaneously proposing a 'Validation Clause' for this amendment, Vodafone is likely to be in trouble again.

It is a near certainty that last year’s budget estimates as regards tax collection are going to be missed and by a fair distance. There will be pressure from both the Congress party as well as UPA allies which will most likely ensure that Pranab da does not touch subsidies! But at the same time, fiscal deficit is shooting up and needs to be contained! So does the Finance Minister have any leeway to offer tax sops to individuals/corporate? Probably not, but will he bite the bullet and present some aggressive, ‘big bang’ tax proposals to fill the Government treasury? Leaving our experienced Finance Minister to do that tightrope walk, Arun Giri, Editor, taxsutra.com presents the 5 big tax proposals most likely to find a mention in tomorrow’s FM speech.

The Economic Survey 2011-12 released today by the Government of India, estimates growth in Indian economy of 6.9% in 2011-12. The Survey states that managing growth and price stability are the major challenges of macroeconomic policy-making. The Economic Survey also refers to the impact of tax policies, collections and its effect on the fiscal deficit and economy.  The Survey states that it would be crucial to raise additional tax resources to raise the level of resources for the Twelfth Plan period (of 2012-2017). This  could be  possible if the critical tax-reforms take off and make the economy more competitive.  The survey also has highlighted at several places that there have been higher tax refunds in the current financial year implying that growth of last year was overstated.

The Income-tax Act, 1961 (‘the Act’) has been amended innumerable times in the fifty one years of its existence. Quite a few of these amendments have been retrospective in nature. The general understanding with regard to retrospective Amendments is that the amendments should either be made to remove an ambiguity or an unintended hardship to the taxpayer. These should usually not be made to overcome favourable court decisions particularly where taxpayers interpreting unambiguous provisions of the Act have got decisions in their favour in respect of which the Revenue has a differing view.

With the looming fiscal deficit, the Europe crisis not going away, the largely negative outcome of the Assembly elections for Congress Party, and the recent report of the Standing Committee on the Direct Taxes Bill, this year’s Budget promises to pack a lot of surprises and all of us are eagerly looking forward to the action on March 16. In this backdrop, it is a good time to revisit the Budget basics in terms of the Key Budget Terms, The Budget Process and the Date of Applicability of various provisions.

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