The Ministry of Finance (MoF) has decided not to repeal the retrospective amendments made to the Income Tax Act, 1956, by the former government, in 2012, stating the government has the sovereign right to make retrospective legislations. The ministry has contended that all the ongoing cases arising out of the amendment should follow the lawful process in which they are currently being adjudicated.

At present, the UK-based telecom company Vodafone Plc is contesting Indian Income Tax department’s tax claim of Rs 200 billion for the former’s acquisition of equity stake in Hutchison Essar from Hutchison Whampoa in 2007.

MoF added that the fresh cases regarding indirect transfer of assets will be scrutinised by a high level committee to be constituted by the Central Board of Direct Taxes (CBDT) before any action is initiated. It also asserted that the new government would provide a stable and predictable tax regime and retrospective tax system would be invoked only in the rarest of the rare cases.

As a result of the finance ministry’s decision, Vodafone has decided to continue with its international arbitration case against the Indian government under the India-Netherlands Bilateral Investment Treaty.