INTERNATIONAL DESK: Bills for amending Deposit Insurance and Credit Guarantee Act and Limited Liability Partnership Act, and Bill for Tribunal Reforms have also become Acts

President Ram Nath Kovid gave his assent to a Bill to bury retrospective taxation. With this, the Taxation Laws (Amendment) Bill has become an Act now.

Meanwhile, Bills for amending Deposit Insurance and Credit Guarantee Act and Limited Liability Partnership Act, and Bill for Tribunal Reforms have also become Acts.

The Taxation Laws (Amendment) Act amends Income Tax Act 1961 and Finance Act 2012. It prescribes that tax demands raised on the basis of the 2012 retrospective amendment for any indirect transfer of Indian assets, if the transaction was undertaken before May 28, 2012, shall be “deemed never to have been passed or made”. It was on May 28, 2012 when the Finance Bill, 2012 received the President’s assent. The latest Act also envisages that no tax demand will be raised in the future for transactions made before May 28, 2012.

The Act also says demand already raised will be ‘nullified’, but with conditions such as the companies concerned will have to withdraw all legal suits. Once they submit the declaration, the government will refund the amount paid without any interest thereon. Now, the government will come out with detailed rules and framework to operationalise the law.

Income-tax demand has been raised in seventeen cases.Of these, four are key which include Cairn (which paid ₹7880 crore as tax), New Singular Wireless (₹119 crore), WNS Capital (₹47 crore) and Vodafone (₹44.74 crore).

Among these four, the cases related to Scotland based Cairn have been the most contentious ones. Hague based Arbitral tribunal pronounced its award on December 21, 2020 in favour of Cairn Energy Plc and Cairn UK Holdings Ltd (CUHL). It asked India to pay Cairn an award amounting to $1232.8 million plus interest and $22.38 million towards arbitration and legal costs. In March this year, India filed an appeal against the ruling.

However, in May this year, the company filed a lawsuit in a US Court against Air India to enforce the award. Then in July, a French court passed an order to freeze certain Indian Government properties in the case pertaining to Cairn Energy. In the beginning of this year, Cairn moved courts in the US, the UK, the Netherlands, Canada, France, Singapore, Japan, the UAE, and Cayman Islands to get the award registered and recognised. This was the first step before seeking seizure of the Indian government assets.

Another important case is the related Netherland based Vodafone International BV, which won an award against India on September 25, 2020. Here too the Government has filed an appeal in Singapore.

Other new Acts

An Act to amend Deposit Insurance & Credit Guarantee Law (1961) will enable depositors to access their deposit up to the sum prescribed under deposit insurance (₹5 lakh) even if the bank is placed under moratorium. Depositors of PMC Bank will also to be covered under the new mechanism. As of now, depositors have to wait to wait for liquidation or the passage of resolution to get the benefit of deposit insurance. This takes up to 8-10 years. With the implementation of the act, payment is to be made within 90 days.

The Limited Liability Partnership (Amendment) Act aims to carry out amendments to the Limited Liability Partnership Act (2008) to decriminalize twelve compoundable offences which deal with procedural and technical violations.

Omission of two provisions has also been effected through the new law. (Business Line)