The Finance Ministry on October 1 notified the changes to Income Tax rules which now officially repeal retrospective tax more than nine years after they came into force. As per the notification, any company like Cairn Energy, Vodafone and others looking to settle pending retrospective tax disputes will have to indemnify the Indian government against any future claims arising out of the said dispute.
The companies will also have to give an undertaking that they will withdraw any pending litigation or proceeding before any forum, with an assurance that they won’t pursue any further claims in the future.
The indemnity bond will have to be furnished by the company and any other interested party with the income-tax authority and its resolution panel, according to the gazette notification, which gives companies 30-60 days to settle their claims.
After the Taxation Laws Amendment Bill was passed in Parliament in the Monsoon Session, the Central Board of Direct Taxes sought feedback from stakeholders.
As per the conditions in the gazette notification, the companies concerned will irrevocably withdraw, discontinue and not pursue any lawsuits, arbitration, conciliation, or mediation either in India or abroad.
“The declarant and all the interested parties shall refrain from facilitating, procuring, encouraging or otherwise assisting any person (including, but not limited to any related party or interested party) from bringing any proceeding or claims of any kind related to any relevant order or orders, or in relation to any award, order, judgment, or any other relief against the government or Indian affiliates in connection with any relevant order or orders,” the gazette stated.
Indian affiliates can be taken to mean Air India or any state-owned entity in this case. In order to put pressure on the Indian government, Cairn had earlier this year taken the national carrier to court in New York.
The interested company can start the process by submitting the undertaking within 45 days effective October 1. Post that the tax authority will have 15 days to pass an order.