India Allays US Allegations That Retrospective Tax Law Amendments Are Discriminatory

Indian Finance Minister Pranab Mukherjee told Lok Sabha that the proposed amendments will not have any negative impact on the foreign investments. His clarification came after the new US ambassador to India Nancy Powell raised the issue in a business meeting on Friday at New Delhi.

Mukherjee said that the amendments just clarify the existing laws and do not counter the provisions of the Double Taxation Avoidance Agreements with 82 countries.

IT will not have any impact on foreign investment flow in the country. This is more so because these clarifications ... will not override the provisions of Double Taxation Avoidance agreements with 82 countries, said Mukherjee, according to an Economic Times Report.

The amendments to the Income-tax Act, 1961, mentioned in the proposed Finance Bill, 2012, intend to make changes relating to offshore mergers and acquisitions that result in transfer of Indian assets with retrospective effect.

The proposed law if passed in the Lok Sabha will enable the Indian authorities to claim more than $2 billion on the British telecom company Vodafone from a 2007 deal, the Deccan Herald reported.

The retrospective change in the law is being criticized by foreign investors and trade bodies.

Addressing the 20th Annual General Meeting of the American Chamber of Commerce in New Delhi Powell said that certain elements in the proposed manufacturing policies were discriminatory to foreign companies.

Several recent policy decisions cause significant concern and dampen sentiment about India's investment climate. The adoption of manufacturing policies discriminatory to foreign companies and the inclusion of retroactive tax provisions in the Finance Bill are two examples, said Powell, according to a Deccan Herald report.