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