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The Taxation Laws (Amendment) Bill 2021

The Taxation Laws (Amendment) Bill 2021

Why in news?

  • Recently, the Government of India has introduced The Taxation Laws (Amendment) Bill, 2021 in the Lok Sabha.
  • The bill seeks to withdraw tax demands made using a 2012 retrospective legislation to tax the indirect transfer of Indian assets.


  • The retrospective tax law was passed in 2012 following a Supreme Court verdict in favour of US-based Vodafone.
  • The Dutch arm of Vodafone Group bought a Cayman Islands-based company in 2007, which indirectly held a majority stake in Indian firm Hutchison Essar Ltd—later renamed Vodafone India—for $11 billion.
  • It was introduced after an amendment to the Finance Act enabled the tax department to impose retrospective capital gains tax for deals — involving the transfer of shares in foreign entities located in India — after 1962.                                   The Taxation Laws (Amendment) Bill 2021
  • While the amendment was aimed at penalising Vodafone, many other companies got caught in the crossfire and have created a host of problems for India over the years.
  • It remains one of the most contentious amendments to the income tax law.
  • Last year, India lost a case in international arbitral tribunal at The Hague against taxing Cairn Energy Plc and Cairn UK holdings Ltd on alleged capital gains the company made when in 2006 it reorganised its business in the country before listing the local unit.

Proposed Changes in Bill

  • Amendments to the Income-tax Act and Finance Act, 2012 to effectively state that no tax demand shall be raised for any indirect transfer of Indian assets if the transaction was undertaken before 28th May 2012.
  • Tax raised for the indirect transfer of Indian assets before May 2012 would be “nullified on fulfillment of specified conditions” such as the withdrawal of pending litigation and an undertaking that no damages claims would be filed.                                                    The Taxation Laws (Amendment) Bill 2021
  • It also proposes to refund the amount paid by companies facing trail in these cases without interest thereon.


  • The bill is likely to benefit many companies including Vodafone and Cairn Energy who had to pay tax based on the retrospective tax demand provision.
  • The amendment will have a direct bearing on the long-running tax disputes with Cairn Energy Plc and Vodafone Group.
  • As per the amendment, the centre will withdraw all back tax demands on companies such as Cairn Energy and Vodafone and will refund the money collected to enforce such levies.
  • This is crucial as the country stands at a juncture today when quick recovery of the economy after the COVID-19 pandemic is the need of the hour and foreign investment will play a significant role in promoting faster economic growth and employment.


Mussoorie Times

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