Once bitten, twice the shy, they say. But the government decided to
give itself another go at Vodafone after the Supreme Court ruled in
favour of the company in January in the Rs 11000 crore tax case. And
again, the government has been restrained as the SC dismissed the review
plea.
Speaking to CNBC-TV18, Mukesh Butani, chairman of BMR Advisors says
that it is welcome news. "What the Supreme Court essentially has said is
that the decision that it rendered in the context of law as it read and
as it interpreted in January 2012 is valid and that there reason for
intervention," he explains.
However, the retrospective amendment, which is in the form of Bill
right now, is still there and one needs to analyze the implications of
what does that do if the Bill gets approved by the parliament.
Hitesh Jain, partner at ALMT Legal says that the game is far from
over and in fact, the battle is just beginning between the government
and Vodafone. "Once the Finance Bill is passed, the real see-saw between
the government and Vodafone can again begin in terms of whether the
government is going to initiate a fresh demand or whether the government
is going to file a curative petition in the Supreme Court," he says.
Butani however believes that the Court has in a way signaled without
saying so that it is not going to take into consideration the amendments
that have been moved by way of a Bill in the Finance Act, 2012. "Bear
in mind that the parliament has unfettered powers to legislate laws,
including retrospective laws," he says. "More importantly retrospective
amendments that impose a charging provision have to be held to be valid
unless there is a challenge under the constitution right that those
changes are arbitrary and unreasonable and violate fundamental
principles," he explains. According to him, if the Finance Bill goes
through and becomes an Act and the tax department goes behind Vodafone,
then Vodafone has the right to say that they recognize the parliament's
unfettered right to change the legislation with prospects, but this is
arbitrary and unreasonable and it violates the fundamental law.
The amendment in the case cannot be viewed on a standalone basis.
What has happened is that they have put in a validation clause which
tends to validate all acts of the tax administration while it
invalidates the court decision. "So, yes, it is true that the court
cannot revive it's own order, but you cannot read that in isolation
since there is a validation clause as well which is the integral part of
the Finance Bill," Butani says.
There are certain judgments and precedence which says that the
parliament has legislated with a validation clause by which money can be
appropriated and the two examples are the ITC
excise duty case and the Laghu Udyog Bharati case with regard to
service tax. "So I think if you view this retrospective amendment along
with a validation clause, I think there is something that is likely to
happen if the Finance Bill goes through in it's present form," he says.
Dinesh Kanabar, deputy CEO and chairman of tax at KPMG points out the
hole in the wall. "If you look at the retrospective amendment as it is
drafted today, it actually gives rise to an interpretation that if there
are substantial assets in India, then the whole of the deal is liable
to be taxed in India, which may not be the very intention," he says.
"Then there is a question of taxes paid in the other jurisdiction etc,
so first one has to wait to see what is the form and shape in which the
amendment will come about, and then obviously could be an issue as to
whether an amendment, if it is brought about, is something the court
will hold the constitution as valid or not," he says
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