UK and International Tax news
India Budget 2012 And Vodafone Decision
Wednesday 9th May 2012
Following the decision of the Supreme Court of India in the Vodafone case [see our International Tax News item of 31 January 2012], the Indian Government has introduced provisions in the 2012-13 Budget and the Finance Bill 2012 which, if enacted, could permit retrospective amendments, with effect from 1 April 1961, to override the Vodafone decision.
Whilst amendments to enable the taxation in India of offshore transfers of companies holding substantial Indian assets were expected, as previously announced in the Direct Taxes Code 2010, the Budget proposes to apply them with retrospective effect. If enacted, they will technically nullify the favourable ruling in the Vodafone case and potentially capture all other indirect transfers in the last eight years.
The Indian Government has confirmed however that cases assessed and finalised up to 1 April 2012 cannot be reopened. The Finance Minister has also recently commented that the new provisions are likely to affect transactions which have been routed through low or nil tax countries with whom India has no double tax agreement.
The Finance Bill 2012 also proposes further extensive GAAR provisions which will require detailed evaluation of investment and/or restructuring transactions involving India and Indian assets. However, it has been proposed that the onus of proof will become that of the Indian tax authorities and not the tax payer and advance rulings will be possible.Contact Us