Pranab defends amending IT Act to deal with Vodafone-type deals

Kolkata, March 31 (IANS) Finance Minister Pranab Mukherjee Saturday said there is "no other way" but to amend the Income Tax Act with retrospective effect to bring into the net Vodfone-type cross-border deals.

"I am posing a very few straight questions to you. We shall have to decide whether you want India to be a no-tax country or India will be a country where there will be taxation," Mukherjee said at an interactive session, organised by the Calcutta Chamber of Commerce.

"Transactions of assets located in India, whether it should be taxed or not. If the answer is that has it has to be taxed, then whether it will have to be taxed in India or at the sources of the company concerned... there comes the question of how it will be protected by the Double Taxation Avoidance Agreement or Tax Exchanging Information Agreement. Except these, there is no other way," he said.

Mukherjee in his 2012-13 budget has proposed to amend the 1962 Income Tax Act with retrospective effect, a move that evoked sharp reaction from Vodafone which Friday said any move by the government to retrospectively change the tax regime was grossly unjust. It said the proposed change contradicted the conclusions of the Supreme Court.

The apex court had held that Vodafone was not liable to pay Rs.11,000 crore as tax on its $11.2 billion acquisition of 67 percent stake in Hutchisson Essar from Hong Kong-based Hutchison Telecom as the deal was done between two foreign entities overseas.

"If the (government's) intention is that no company should pay double taxes, and equally it is clear that there cannot be a situation, that they will have to pay no taxes, either to the country of source or to the country of operation, then what is the better remedy," asked the finance minister.