Taxation
'Foreign investors apprehensive about retrospective tax demands'

Cairn India in its petition had sought the quashing of the tax demand, as it felt there was an undue delay in initiating the proceedings -- a lapse of over six years

 

With the Delhi High Court to resume hearing on Wednesday on the Rs.20.495 crore tax case slapped on Cairn India, experts voiced the apprehensions of foreign investors about an adversarial tax regime.
 
"Foreign investors expect stability and clarity in tax policy, which has been coming from the top with the prime minister's Make in India initiative for ease of doing business and the finance minister's statements on no retrospective taxation," senior apex court advocate Gopal Jain told IANS.
 
"However, policy should trickle down to the ground level, where there is a big gap in ground reality and companies are being served retrospective tax notices.
 
"Investors, who otherwise have multiple choice of destinations, look at government's commitment to exorcise ghosts of the past," he added.
 
Cairn India in its petition had sought the quashing of the tax demand, as it felt there was an undue delay in initiating the proceedings -- a lapse of over six years.
 
The demand is for alleged failure by Cairn India, a part of the Vedanta Group, to deduct a withholding tax on capital gains that arose when it was acquired from the parent company in Britain in 2006-07.
 
The Rs.20,495 crore tax demand comprises Rs.10,248 crore tax and Rs.10,247 crore interest.
 
Among other foreign investors embroiled in tax disputes with the government are Nokia, Vodafone, and Mondelez International for total claims of about $10 billion.
 
Another tax controversy erupted earlier this month with foreign institutional investors (FIIs) over demands for $95 million on past capital gains.
 
According to depository data on Monday, FIIs are set to break an 11-month streak of net inflows into the Indian debt market, having turned net sellers in April for the first time since April 2014.
 
Net outflows till April 27 have been Rs.817 crore - in the wake of recent tax notices demanding tax at 20 percent on interest income, as opposed to five percent without minimum alternate tax (MAT).
 
The Indian government plans to set up a high-level committee to sort out taxation issues of the past and make the system predictable, Finance Minister Arun Jaitley, who has called the Cairn a "legacy" issue, announced on Monday.
 
"I am considering a high-level committee to explore what can be done to resolve the past and move beyond it in a way that would provide real predictability and certainty to investors," he wrote in an opinion piece in the Financial Times.
 
"Even though it is only the legacy issues that haunt us, we recognise that we must put a quick end to them," he added.
 
Addressing the annual general meeting here of the American Chamber of Commerce on Tuesday, Amitabh Kant, Industrial Policy and Promotion secretary, said the NDA government, which had been saddled with "tremendous legacy issues", was working overtime to resolve these and alluded to Jaitley's announcement.

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Cabinet approves changes to Companies Act

The cabinet approved "doing away with the requirement of filing a declaration by a company before commencement of business or exercising its borrowing powers," a cabinet communique said.

 

To make it easy to do business in India, the union cabinet on Wednesday rationalised certain documentation procedures required for companies.
 
The cabinet approved "doing away with the requirement of filing a declaration by a company before commencement of business or exercising its borrowing powers," a cabinet communique said.
 
It also approved "rationalizing the procedure for laying draft notifications granting exemptions to various classes of companies or modifying provisions of the Act in Parliament," the statement added.
 
These amendments to the Companies (Amendment) Bill, 2014 "will address issues related to ease of doing business and put in place a speedier process for approval of draft notifications for providing exemptions etc. from specific provisions of the Act to a class of companies," the ministry of corporate affairs said in a statement here.
 

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Indian market trends

The Sensex and the Nifty fell 3% and 4%, respectively, during the fortnight ended 22nd April. ML Large-cap Index and ML Mega-cap Index declined 5% and 6%, respectively. ML Mid-cap Index and ML Micro-cap Index fell 3% each. 

 

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