In its zeal to make everyone a tax evader, an imperious UPA government has made a ridiculous amendment to the Income Tax law with retrospective effect
The Union Budget for the year 2012-13, presented by Pranab Mukherjee on Friday was generally void of any major reforms. However, there has been one major change to the income tax law, which found no mention in the finance minister’s speech. The government has tweaked an important section of the law, which relates to “Income deemed to accrue or arise in India.” The “retrospective amendment” to Section 9 of the Income Tax Act, will come to effect from this year. This means any entity which has adhered faithfully and legally to the law prior to the amendment will now have to pay taxes and other royalties, no matter what.
According to the Finance Bill 2012, the government has made the following changes to the Section 9 of the Income Tax Act, which will be effective from 1 June, 1976;
1) it is hereby clarified that the transfer of all or any rights in respect of any right, property or information includes and has always included transfer of all or any right for use or right to use a computer software (including granting of a licence) irrespective of the medium through which such right is transferred.
2) it is hereby clarified that the royalty includes and has always included consideration in respect of any right, property or information, whether or not—
a) the possession or control of such right, property or information is with the payer;
b) such right, property or information is used directly by the payer;
c) the location of such right, property or information is in India.
3) it is hereby clarified that the expression ‘process’ includes and shall be deemed to have always included transmission by satellite (including up-linking, amplification, conversion for down-linking of any signal), cable, optic fibre or by any other similar technology, whether or not such process is secret.
What are the implications of this? According to Ameet Patel, tax expert who spoke at Moneylife Foundation’s seminar on the Union Budget, “This is very relevant for foreign software companies, who sell their software in India. Also, the definition has been widened to include transmission of satellites. So, all foreign media and broadcasting companies which are allowing their satellites to be used for viewing various TV channels into your homes and offices are going to be affected.” Why has the government gone back in time is unclear but in one stroke, it has effectively empowered income tax officials to retrieve “missing income”. The officials will now be at liberty to target whichever software and media entity falls under the purview of the amendment.
The government has targeted software, information technology and media firms, by taxing them retrospectively. However, it is funny to note that most Indians did not have televisions or computers, much less cables or fibre optics in those days. In its zeal to discover missing income and unleash harassment of taxpayers, an imperious government has obviously lost all sense of proportions, time and place.
Inside story of the National Stock Exchange’s amazing success, leading to hubris, regulatory capture and algo scam