In a bid to bury the ghost of retrospective taxation, the government on Thursday brought a Bill in the Lok Sabha to withdraw all back tax demands on companies, such as Cairn Energy and Vodafone, The government also said it would refund the money collected to enforce such levies. 

Finance Minister Nirmala Sitharaman introduced The Taxation Laws (Amendment) Bill, 2021 in the Lok Sabha that seeks to withdraw tax demands made using a 2012 retrospective law to tax the indirect transfer of Indian assets. 

The Bill provides for the withdrawal of tax demand made on “indirect transfer of Indian assets if the transaction was undertaken before May 28, 2012 (the day the retrospective tax legislation came into being).” “It is also proposed to refund the amount paid in these cases without any interest thereon,” it said. 

The Bill has a direct bearing on long-running tax disputes with British firms Cairn Energy and Vodafone Group. 

The Indian government has lost two separate arbitrations brought by the two companies against the levy of retrospective taxes. 

While the government has virtually no liability in the Vodafone case, it has to refund $1.2 billion to Cairn Energy for the shares of the company it had sold, tax refund withheld and dividends confiscated. 

The Bill states that the issue of taxability of gains arising from the transfer of assets located in India through the transfer of shares of a foreign company (indirect transfer of Indian assets) was a subject matter of protracted litigation.