CPT V24P7-Art1 (Content).pmd - Taxmann

INTRODUCTION
Vodafone story -
1. One thought that dust had finally settled
on the Vodafone International Holdings B.V. v.
Union of India [2012] 204 Taxman 408/17
taxmann.com 202 with the decision of the
Supreme Court. But it was not to be. The
Finance Ministry, Government of India, not
being satisfied with the above decision, sought
to have the last laugh in the matter by proposing
declaratory amendments to the Income-tax Act
with retrospective effect, in the Finance Bill,
2012, so as to nullify the decision of the Apex
Court. The proposed amendments to the Incometax
Act were passed by the Parliament and
have also become the law after receiving the
assent of the President. However, the issue
has not died down. The foreign investors as
well the Indian industrial houses, who had
adopted the same strategy like Hutchinson
Inc. for making investments in new business
ventures in India to avoid capital gains tax on
disinvestment, are agitating against the
amendment, particularly its retrospective effect,
as they apprehend that their tax planning in
the earlier years might have come within the
departmental scanner. They are also not happy
with the nullification of the decision of the
highest Court of law and the amendments,
which block the tax planning strategy for
investments they have followed so far in different
Re-written
DIRECT TAX LAWS
A.J. MAJUMDAR
Member (Retd.), CBDT
countries. The issue has now transcended from
being merely a tax issue to a larger economic
issue, like the country becoming an unattractive
destination for foreign direct investment – a
country where the decision of the highest Court
of law is not followed, which is receiving
attention in the highest quarters of the
Government. The present article, however, only
discusses on the legal aspects of the issue and
not its economic and political ramifications.
2. THE RECENT AMENDMENTS TO THE
INCOME-TAX ACT
2.1 These amendments are -
(a) An Explanation has been added, for removal
of doubt, in the definition of capital
asset in section 2(14) to clarify that
“property” includes and shall be deemed
to have always included any rights in or
in relation to an Indian company, including
rights of management or control or
any other rights whatsoever.
(b) It has been clarified for removal of doubt
by way of Explanation 2 to the definition
of transfer in section 2(47) that “transfer”
includes and shall be deemed to have
always included disposing of or parting
with an asset or any interest therein,
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