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Originally Posted by condor Cairn's merger-ing of the entities is said to be opaque. And Govt of India says the cases are subject to India jurisdiction & courts.
The tax laws for retrospective taxation were passed around 2006. Even the Vodafone case was under the same law.
I dont understand this law at all, even in Layman terms. Hope there is an out of court settlement on this. |
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Originally Posted by srh What is referred to as 'retrospective law' is just a small piece added to legislation to enforce the intent & spirit of the original applicable law. The government is well within its rights to do it when loopholes get exposed/ used to nullify the spirit of the law.
It is a travesty that Indian courts allow corporates to get off the hook just based on technicalities. On other occassions, these same courts allow wide ranging dictats based on nebulous interpretation of fubdamental rights, basic structure etc...... But then that is how the gravy train rolls - huge amounts involved mean even courts can be gamed. |
I am sorry, as a lawyer practicing primarily in tax litigation for the last decade, I beg to differ. The retrospective law is NOT meant to enforce enforce the intent & spirit of the original applicable law. The technicalities of the said transaction may go into several pages, but lets keep it simple. The Government gets into sovereign treaties with other governments to confer benefits. Every individual has a right to minimize the amount of tax they pay. Taxation is a technical subject, so any person is well within their rights to invoke technicalities.
As far as foreign investors are concerned, they do a proper due diligence before investing. Taxation is a major aspect of an investment call. What the Indian government did with the retrospective taxation in my opinion is akin to the honey trapping of these corporates. Called them in by showing a certain tax related framework and then changed the rule of the game. What would you say if the government allowed you to buy a car, completely legally and drive it, then change the rule few years down the line and say driving it was illegal and then fine you for buying the car and using it? I admit this is a lose example, but it is apt given the automotive nature of this forum.
The government of India may have a right to breach its sovereign promises in the form of its treaties, primarily because it is sovereign. Doesn't mean it should. The promises contained in the treaties should mean something. The government in the Vodafone case (was a different political party then) acted like a vengeful jilted lover and the opposition denounced it. Now that the opposition is in the power, it does not want to let go of the money and is not pursuing exactly what it denounced!
The government is well within its rights to do it when loopholes get exposed/ used to nullify the spirit of the law. A treaty is not a loophole. It was kept there by design to encourage investment. It is like the treaty with Thailand that allows manufacturers to import vehicles in India through the CBU route at a lower rate of duty than certain other jurisdictions.This is to promote trade between Thailand and India and has been deliberately introduced for mutual benefit. However, lets face facts, seeing the sums involved, the Indian government just got greedy. As far as the arbitration is concerned, it is conducted by an international center. There is no 'corporates' getting off the hook here. There is only what was promised and renegaded upon. It hurts the country on a global scale. The small piece of legislation changed the entire law. What was done is patently unfair and against international as well as domestic law.
There is no gravy train. There is a Venus fly trap that lured investors into India by giving them the option of being exempt from capital gains if they invested from certain countries. Now, that they are in the clutches, they are struggling to get out.
"On other occasions, these same courts allow wide ranging dictats based on nebulous interpretation of fundamental rights, basic structure etc...... But then that is how the gravy train rolls" - Please do not make wide sentences that have nothing to do with a technical topic. As far as technicalities are concerned, the government levies taxes technically and not with the 'intent and spirit' of law. Why should the Assessees then get the short end of the stick?
Views expressed are personal. This doesn't tantamount to legal advice. Also, though I have quoted a post, please do not construe this as an attack, personal or otherwise. That is not the intention.