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Why Vodafone Retrospective Law Is Not Disrespect To Supreme Court: FM

Shri. Pranab Mukherjee

Why Vodafone Retrospective Law Is Not Disrespect To Supreme Court: FM

Editorial Staff

Finance Minister Pranab Mukherjee delivered a speech yesterday in the Rajya Sabha in which he cleared the air on the retrospective amendments to nullify the verdict of the Supreme Court in the Vodafone case. The Government was not being disrespectful or confrontational with the Supreme Court, he said & added that if the Government had not taken the proactive stand, the consequences would have been draconian for the Country

The noteworthy aspect of Pranab Mukherjee’s speech in the Rajya Sabha yesterday was that, inspite of the huge groundswell of domestic and international opinion against the proposed retrospective amendments seeking to nullify the verdict of the Supreme Court, he was not at all apologetic. Instead, he looked the members of the opposition in the face and had an eyeball to eyeball confrontation with them, forcing them to blink and look away.

.. changing the law so as to nullify the verdict of the Supreme Court in Vodafone’s case did not in any way mean showing “disrespect” to the Supreme Court and nor did it mean that the Constitutionally assigned responsibilities of the Supreme Court were being ignored … just as the Judiciary had the right to interpret laws, the Legislature had the right to enact laws and if, in that process, there were divergences of opinion, it could not be treated as confrontation; it was an honest difference of opinion, and if we make an attempt at reconciling that honest difference of opinion, it is not wrong

Taking off from where had left in the Lok Sabha, Pranab Mukherjee dealt with the charge that his detractors had leveled against him that he was being insensitive in going against the law laid down by the Supreme Court. Pranab Mukherjee explained that while it was true that the Supreme Court was discharging a constitutional responsibility and was the last interpreter of the law, Parliament had an equally grave constitutional responsibility to make laws for the benefit of the Country. He pointed that the concept of the Supreme Court interpreting the law and Parliament changing it to reflect its intention was not new but could be traced to the very beginning when the first amendment to the Constitution of India took place in June, 1951. He emphasized that Parliament was omnipotent and had powers to amend each and every article of the Constitution of India subject to the “basic structure” of the Constitution as held in Keshavanand Bharati.

Pranab Mukherjee argued that changing the law so as to nullify the verdict of the Supreme Court in Vodafone’s case did not in any way mean showing “disrespect” to the Supreme Court and nor did it mean that the Constitutionally assigned responsibilities of the Supreme Court were being ignored. He painstakingly explained that in a federal democracy, where there was a division of powers, each constitutional organ had its own responsibility and just as the Judiciary had the right to interpret laws, the Legislature had the right to enact laws and if, in that process, there were divergences of opinion, it could not be treated as confrontation; it was an honest difference of opinion, and if we make an attempt at reconciling that honest difference of opinion, it was not wrong.

Pranab Mukherjee also alluded to the discussion he had with Mr. George Osborne, the Chancellor of the Exchequer. He said that he had explained to Mr. Osborne that by the retrospective amendment, India was seeking to do that which the United Kingdom had already done in 2008 by the 21 year old retrospective amendment with effect from 1987.

India is not a tax haven & while it is desperate for foreign exchange, it will not stoop to the extent of converting itself into a Cayman Island or an Isle of Man … Vodafone representatives had been warned on two occasions by the Government that the transaction was going to attract tax and they were responsible to deduct taxes … Vodafone defied the advice that it got from the Indian government and was responsible for the mess that it was in

Pranab Mukherjee assured the House that while the Double Taxation Avoidance Agreements entered into by India with 82 Countries would not override the international obligations he would ensure that each one of them was implemented in letter and spirit.

On the specifics of the Vodafone case, Pranab Mukherjee expressed steely resolve that while foreign companies were welcome to come to India and participate in its growth, they would have to pay taxes if they gained from Indian assets. He clarified that he had told Vodafone representatives that they had been warned on two occasions by the Government that the transaction was going to attract tax and they were responsible to deduct taxes. Pranab Mukherjee suggested that Vodafone defied the advice that it got from the Indian government and was responsible for the mess that it was in.

India is not a tax haven” Pranab Mukherjee thundered and said that while India was desperate for foreign exchange and had initiated several measures to attract FDI, he would not stoop to the extent of converting India into a Cayman Island or an Isle of Man. “India will be a country which honours its international commitment” Pranab assured. At the same time, if there were legitimate tax demands, then no stone would be left unturned to collect it, Mukherjee said.

Pranab Mukherjee also expressed surprise at the huge noise that had been created as a result of the retrospective amendments even though it was actually a routine affair. “Every Finance Minister, including Yashwant Sinha (of the BJP) has carried out retrospective amendments since 1962” he explained and added that this time it had attracted wide attention only because it involved big companies and a huge amount. He also indicated that it was the Supreme Court which had directed that the clarificatory amendment be brought into the statute.

Pranab Mukherjee also pointed out that if the retrospective amendments had not been enacted and if the Supreme Court’s verdict had been accepted, the consequences would have been draconian for the Country because, apart from Vodafone, there were many other companies which had accepted the interpretation of the Income Tax Department and had paid up the taxes. All of those taxes, aggregating about Rs. 40,000 to 50,000 crores, would have to be repaid together with interest. This position was simply unacceptable, Pranab Mukherjee emphasized.

Pranab Mukherjee also subtly criticized the members of the opposition and some sections of the public who had raised an outcry against the retrospective amendments. He cautioned the Parliamentarians that in their anxiety to express concern, they should not create panic. “Whatever is said in the Lok Sabha & Rajya Sabha carries weight and if there is a slip or an unguarded utterance, it may have adverse impact” he said and requested everybody to keep that in mind.

12 comments on “Why Vodafone Retrospective Law Is Not Disrespect To Supreme Court: FM
  1. CA. Y. M. Agarwala says:

    Multinational companies are taking the nation for a ride. they are exploiting every loopholes of the taxation system. they are also taking advantage of the weak system and corrupt practices prevailing in the country. I do not find any thing wrong when amendments are made with retrospective effect to plug the weaknesses of the tax law.

  2. CA. K K SENAPATI says:

    At last we have a person as F.M. whom we can respect, after all these years of Chidambarms. India is not a banana republic where big corporations can play their game. All such MNCs be forewarned to respect laws of India while doing business here. Let nobody escape trying to show their weight or finding loopholes in Double Taxation Avoidance Agreement.

  3. R.Sekhar says:

    Changing times..Respecting another Constitutional Authority while making a Retro amendment..

    In the past, Section 80M controversy was set at rest by a Retrospective Amendment..but the Amending Act(Finance No 2 Act 1980) has saved all cases where the Supreme Court has decided against the Revenue..
    Extracts from CBDT Circular :
    In order to preserve the sanctity of the ruling of the Supreme Court, the Finance Act has made a saving provision in section 44 to provide that the provisions of new section 80AA will not apply to the assessment of an assessee for a particular assessment year where the Supreme Court has, on an appeal or reference in respect of the assessment of that assessee for that year, held before the 18th June, 1980, i.e., the date on which the Finance (No. 2) Bill, 1980 was introduced in the Lok Sabha, that the deduction in respect of inter-corporate dividends should be allowed with reference to the full amount of dividends

  4. CA Prachi Parekh says:

    Somehow, The FM’s speech makes sense…..convinces

  5. CA.Kaushal Jindal says:

    I think that whatever is said by Mr.Pranab Mukharjee in the parliament is very true and no one is able to deny his views. He is a great visioner and he knows the fact that if this decision of SC will go through then it is just like giving an weapon to the MNC’s to come in india, earn income and then Repatricaiate income in their country without paying tax in India. We can’t let them happen. Truly Unacceptable, no one can play with our economy. Yes,we need Foreign investments but surely not on this cost

  6. CA Avinash Rajopadhye says:

    The F.M. is trying to “export” Income Tax Act 1961.He is a great visionary.

  7. CA Attal Laxminarayan says:

    Very well said and explained. Congratulations to our learned Finance Minister. We as country definitely has right to tax gains relating to our assets. While investing in the country, Foreign Investors should become partners in growth and share benefits and not come here for LOOT.

  8. This so called money of 50000 crores would not have come to us unless this retrospective amendment is made by the Parliament for which it must receive a pat. Now the government will do the good it it first reward the officer /team that initiated show cause action in this case as the assessee never approached the officer for any exemption. secondly the rest of the money must be earmarked for the welfare of poor population of this country exclusively.

  9. K S Dhingra says:

    FM has just moved a proposal before the Parliament to clarify the intent of the relevant provision of the Income Tax Act. He not committed any crime by doing so. It is left to the Parliament to adopt the proposal in the form of statute. There exists no ground to criticize FM or the Government on this count.

    The law declared by the Supreme Court which is binding on every authority.person in India is that clarification is always effective from the date of enactment of the statutory provision, that is, the clarificatory enactment is in essence retrospective. Then why raise so much halla gulla The tax collected will after all used for the welfare of India and its citizenry.

  10. NILESH CHAWDA says:

    head i win, tail u loose, lelislative intentio sif not clearly laid
    down while enaacting law can b elaid down as FM wants it
    We[M.P.] as manufacturer of law r the best interpreter of law

  11. CA Avinash Rajopadhye says:

    It seems that through retrospective amendment following Vodafone, the Finance Minister is trying to reduce “deficits” of past budgets .

  12. Surjeet Singh says:

    Why we need to respect Courts for their wrong decisions??? Why they (judges) are not held responsible even if their judgement is wrong beyond doubt? WHY?

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