Retro tax scrapping comes with a rider

Nullification of tax demands in cases Vodafone and Cairn cases, which are likely to be the beneficiary of the government's move, is not automatic. Rather, it is subject to certain conditions, which include the withdrawal of cases and claims for costs, interest and damages by the affected taxpayers.

"The Taxation Laws Amendment Bill, 2021, introduced by the government in Lok Sabha will nullify retro tax demands. This apparently is done to give benefit to Vodafone UK, which was in litigation for 15 years with Indian Income-Tax (I-T) department. Hopefully, Vodafone UK will pump more money into Idea now," say analysts.

Cairn UK will also be a beneficiary of this development. The government has suddenly withdrawn indirect transfer capital gain provisions for years prior to 2012.

Commenting on it, Naveen Aggarwal, Partner – Tax, KPMG in India, said: "The proposed amendments can help put an end to long-drawn litigation on this vexed issue. These amendments come in the wake of two arbitration awards, which held these retrospective amendments to be violative of India's obligations under its Bilateral Investment Treaties. However, it is important to note that the nullification of demands in such cases is not automatic, but is subject to certain conditions which include the withdrawal of cases and claims for costs, interest and damages by the affected taxpayers."