Change in tax law ‘not vindictive’: Pranab

Finance minister Pranab Mukherjee on Sunday assured the business community that the government had no vindictive intent behind the proposal in the Budget to amend tax laws with retrospective effect, and it does not plan to reopen a large number of old cases by using the changes in the Income-Tax Act.

He said the budget proposal has been made only to protect revenue erosion. "I can assure the industry that there is no intention of opening a plethora of old cases on  this or that plea because that is simply not permissible (under the laws)," he said at a meeting of the Confederation of Industry in New Delhi on Sunday.

The finance minister said that through double taxation avoidance agreements (DTAA) and tax information exchange agreements (TIEA), India wants to ensure that any foreign investors investing in India should not be taxed twice and also should not get away by not paying tax at all.

In the Budget for 2012-13, Mukherjee has proposed amending the Act with retrospective effect to bring into tax net overseas transactions like the Vodafone-Hutchison deal. In fact the amendment has been brought about largely to collect $2.2 billion in taxes from Vodafone over its $11 billion deal to buy Hutchinson Whampoa's stake in what was then Hutchinson-Essar in 2007.

The Supreme Court recently rejected the taxman's claim on the ground that the transaction took place overseas between two foreign companies.

Without referring to the Supreme Court order, Mukherjee said that though the Supreme Court was the ultimate interpreter of law, ''that does not take away the right of the legislative to express its intentions''.