Vodafone Judgement – No Retrospective Amendment; Please
WHILE the Vodafone judgement has received universal acclaim – from the trade, the Government is maintaining a studied silence – they are studying the judgement. There is a lurking fear that the Government might resort to the dubious power of retrospective legislation to undo the Supreme Court judgement. The Government may lose a few thousands of Crores by accepting the Supreme Court judgement, but by negating it, we are going to lose credibility in the international market.
In any case, the Direct Tax Code, is supposed to have taken care of this issue and so the future is taken care of and a little money lost in the past should be simply treated as a loss and forgotten. Let us retain the tremendous respect the country has earned through the Supreme Court judgement.
Did the DTC also contribute to Vodafone victory? In para 71 of the Vodafone judgement, the Supreme Court observed, "Direct Tax Code (DTC) Bill, 2010 proposes to tax income from transfer of shares of a foreign company by a non-resident, where at any time during 12 months preceding the transfer, the fair market value of the assets in India, owned directly or indirectly, by the company, represents at least 50% of the fair market value of all assets owned by the company. Thus, the DTC Bill, 2010 proposes taxation of offshore share transactions. This proposal indicates in a way that indirect transfers are not covered by the existing Section 9(1)(i) of the Act. In fact, the DTC Bill, 2009 expressly stated that income accruing even from indirect transfer of a capital asset situate in India would be deemed to accrue in India. These proposals, therefore, show that in the existing Section 9(1)(i) the word indirect cannot be read on the basis of purposive construction".