## Report on the Taxation Laws Amendment Act, 2021
**1. Executive Summary:**
This report analyzes the Taxation Laws Amendment Act, 2021, a legislative amendment to the Income-tax Act, 1961 and the Finance Act, 2012. The core purpose of this amendment, as inferred from the provided text, is to address issues related to retrospective taxation, specifically concerning income arising from the transfer of shares or interests in companies or entities registered outside India, made before May 28, 2012. Key findings indicate that the amendment introduces provisions for nullifying assessments, reassessments, and orders passed in certain cases if specific conditions are met, including the withdrawal of pending appeals or arbitration proceedings.
**2. Introduction:**
This report aims to provide an informative overview of the Taxation Laws Amendment Act, 2021 (Act No. 34 of 2021), based solely on the official government policy text provided. The report will analyze the key provisions and likely impacts of the amendment.
**3. Policy Overview:**
* This Act is an amendment to the Income-tax Act, 1961, and the Finance Act, 2012.
* Core Objective(s): The core objective, inferred from the text, appears to be to resolve disputes and provide relief related to retrospective taxation levied on indirect transfer of assets located in India, specifically related to transfers before May 28, 2012.
**4. Background and Rationale:**
The likely reason for this amendment, inferred from the text, is to address the controversies and potential economic disincentives caused by the application of retrospective taxation to indirect transfers of assets located in India. The amendment seems designed to provide a mechanism for resolving existing disputes and preventing future litigation by offering a path to nullify past tax demands if certain conditions are met. This suggests a desire to create a more predictable and investment-friendly tax environment.
**5. Key Provisions / Changes:**
The Taxation Laws Amendment Act, 2021, introduces the following changes to the Income-tax Act, 1961, and the Finance Act, 2012:
* **Amendment to Section 9 of the Income-tax Act, 1961:**
* **Specific Part Changed:** Sub-section 1, clause (i), Explanation 5 is amended by inserting additional provisos.
* **New Rule/Provision:** The amendment introduces three new provisos. The first proviso stipulates that Explanation 5 shall not apply to assessments, reassessments, orders enhancing assessment, reducing refunds, increasing liabilities, or deeming a person an assessee in default under specified sections of the Income-tax Act, in respect of income accruing or arising through transfer of assets situated in India in consequence of transfer of a share or interest in a company/entity registered outside India, made *before* May 28, 2012. The second proviso allows for the assessments, reassessments, orders enhancing assessment, reducing refunds, increasing liabilities, orders deeming a person an assessee in default, or penalty orders related to the same income arising from indirect transfers made *before* May 28, 2012, to be deemed never to have been passed or made if the person fulfills specified conditions. The third proviso specifies that any amount refundable due to fulfilling the specified conditions will be refunded without interest under section 244A.
* **Difference/Effect:** This change provides a pathway for nullifying tax demands raised on indirect transfers before May 28, 2012, provided the assessee meets certain conditions. This essentially rolls back the retrospective application of the tax law in these specific circumstances if the conditions are met.
* **Amendment to Section 119 of the Finance Act, 2012:**
* **Specific Part Changed:** Section 119 is amended by inserting new provisos.
* **New Rule/Provision:** The amendment introduces two new provisos. The first proviso stipulates that Section 119 shall cease to apply to a person who has filed an appeal or writ petition, initiated arbitration proceedings or conciliation, or mediation, or has given notice under any agreement entered into by India with any other country or territory outside India, who either withdraws or submits an undertaking to withdraw such appeal or writ petition. The second proviso indicates that if any amount becomes refundable to the person as a consequence of him fulfilling the conditions, such amount shall be refunded to him, but no interest under section 244A of the Incometax Act, 1961 shall be paid on that amount.
* **Difference/Effect:** This change provides a pathway for nullifying tax demands raised on indirect transfers before May 28, 2012, provided the assessee meets certain conditions. This essentially rolls back the retrospective application of the tax law in these specific circumstances if the conditions are met.
**6. Target Audience and Stakeholders:**
Based on the text, the direct target audience and stakeholders are:
* Companies and entities, both Indian and foreign, that were subject to tax demands due to the indirect transfer of assets located in India before May 28, 2012.
* Individuals and entities involved in litigation, arbitration, or other dispute resolution mechanisms related to such tax demands.
* Tax authorities responsible for assessment, reassessment, and refunds related to these cases.
**7. Implementation Aspects (Inferred):**
* **Responsible Agencies/Bodies:** The Income Tax Department is the primary agency responsible for implementing these changes.
* **Timelines/Procedures:** The text mentions the requirement for taxpayers to withdraw appeals, writ petitions, and arbitration proceedings to fulfill the specified conditions. The "form and manner as may be prescribed" indicates that the Income Tax Department will likely issue detailed guidelines and procedures for implementing these provisions, including the specific forms for undertakings.
**8. Expected Outcomes / Impact of Changes:**
The likely intended outcomes of these specific changes are:
* Resolution of existing tax disputes related to indirect transfers before May 28, 2012.
* Reduction in pending litigation and arbitration cases involving these tax demands.
* Improvement in investor sentiment and confidence in the Indian tax system by addressing concerns about retrospective taxation.
* A reduction in tax revenue, offset by an increased investment.
**9. Conclusion:**
The Taxation Laws Amendment Act, 2021 represents a significant effort to address the controversies surrounding retrospective taxation on indirect transfers of assets. By providing a mechanism for resolving existing disputes and preventing future litigation under specified conditions, the amendment aims to create a more stable and predictable tax environment, potentially fostering greater investor confidence and promoting foreign investment. The success of this amendment will depend on the clarity and efficiency of the implementation guidelines issued by the relevant authorities.
Key Entities Referenced
Taxation Laws Amendment Act, 2021: An Act further to amend the Income-tax Act, 1961 and the Finance Act, 2012.
Parliament: Legislative body that enacted the Taxation Laws Amendment Act, 2021.
Incometax Act, 1961: Indian law being amended by the Taxation Laws Amendment Act, 2021.
Finance Act, 2012: Indian law being amended by the Taxation Laws Amendment Act, 2021.
High Court: Mentioned in the context of filing a writ petition against any order in respect of said income.
Supreme Court: Mentioned in the context of filing a writ petition against any order in respect of said income.
New Delhi: Place of publication of the Gazette of India.
India: Country enacting and affected by the Taxation Laws Amendment Act, 2021.
Anoop Kumar Mendiratta: Secretary to the Govt. of India.
jftLVªh lañ Mhñ ,yñ—(,u)04@0007@2003—21
REGISTERED NO. DL—(N)04/0007/2003—21
सी.जी.-डीx.एxलx.G-अI.D-1H30x8x2x021-228986
CG-DL-E-13082021-228986
xxxGIDExxx
vlk/kkj.k
EXTRAORDINARY
Hkkx [k.M
II — 1
PART II—Section 1
izkf/kdkj ls izdkf'kr
PUBLISHED BY AUTHORITY
lañ 46 ubZ fnYyh] 'kØq okj] vxLr 13] 2021@Jko.k 22] 1943 ¼'kd½
]
No. 46] NEW DELHI, FRIDAY, AUGUST 13, 2021/SRAVANA 22, 1943 (SAKA)
bl Hkkx esa fHkUu i`"B la[;k nh tkrh gS ftlls fd ;g vyx ladyu ds :i esa j[kk tk ldsA
Separate paging is given to this Part in order that it may be filed as a separate compilation.
MINISTRY OF LAW AND JUSTICE
(Legislative Department)
New Delhi, the 13th August, 2021/ Sravana 22, 1943 (Saka)
The following Act of Parliament received the assent of the President on the
13th August, 2021, and is hereby published for general information:—
THE TAXATION LAWS (AMENDMENT) ACT, 2021
NO. 34 OF 2021
[13th August, 2021.]
An Act further to amend the Income-tax Act, 1961 and the Finance Act, 2012.
BE it enacted by Parliament in the Seventy-second Year of the Republic of India as
follows:—
CHAPTER I
PRELIMINARY
1. This Act may be called the Taxation Laws (Amendment) Act, 2021. Short title.
CHAPTER II
AMENDMENT TO THE INCOME-TAX ACT, 1961
43 of 1961. 2. In section 9 of the Income-tax Act, 1961, in sub-section (1), in clause (i), in Amendment
Explanation 5, after the third proviso, the following provisos shall be inserted, namely:— of section 9.
"Provided also that nothing contained in this Explanation shall apply to—
(i) an assessment or reassessment to be made under section 143,
section 144, section 147 or section 153A or section 153C; or2 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
(ii) an order to be passed enhancing the assessment or reducing a refund
already made or otherwise increasing the liability of the assessee under
section 154; or
(iii) an order to be passed deeming a person to be an assessee in default
under sub-section (1) of section 201,
in respect of income accruing or arising through or from the transfer of an asset or a
capital asset situate in India in consequence of the transfer of a share or interest in a
company or entity registered or incorporated outside India made before the 28th day
of May, 2012:
Provided also that where—
(i) an assessment or reassessment has been made under section 143,
section 144, section 147 or section 153A or section 153C; or
(ii) an order has been passed enhancing the assessment or reducing a
refund already made or otherwise increasing the liability of the assessee under
section 154; or
(iii) an order has been passed deeming a person to be an assessee in
default under sub-section (1) of section 201; or
(iv) an order has been passed imposing a penalty under Chapter XXI or
under section 221,
in respect of income accruing or arising through or from the transfer of an asset or a
capital asset situate in India in consequence of the transfer of a share or interest in a
company or entity registered or incorporated outside India made before the 28th day
of May, 2012 and the person in whose case such assessment or reassessment or order
has been passed or made, as the case may be, fulfils the specified conditions, then,
such assessment or reassessment or order, to the extent it relates to the said income,
shall be deemed never to have been passed or made, as the case may be:
Provided also that where any amount becomes refundable to the person referred
to in fifth proviso as a consequence of him fulfilling the specified conditions, then,
such amount shall be refunded to him, but no interest under section 244A shall be paid
on that amount.
Explanation.—For the purposes of fifth and sixth provisos, the specified
conditions shall be as provided hereunder:—
(i) where the said person has filed any appeal before an appellate forum or
any writ petition before the High Court or the Supreme Court against any order
in respect of said income, he shall either withdraw or submit an undertaking to
withdraw such appeal or writ petition, in such form and manner as may be
prescribed;
(ii) where the said person has initiated any proceeding for arbitration,
conciliation or mediation, or has given any notice thereof under any law for the
time being in force or under any agreement entered into by India with any other
country or territory outside India, whether for protection of investment or
otherwise, he shall either withdraw or shall submit an undertaking to withdraw
the claim, if any, in such proceedings or notice, in such form and manner as may
be prescribed;
(iii) the said person shall furnish an undertaking, in such form and manner
as may be prescribed, waiving his right, whether direct or indirect, to seek or
pursue any remedy or any claim in relation to the said income which may otherwise
be available to him under any law for the time being in force, in equity, under anySEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 3
statute or under any agreement entered into by India with any country or territory
outside India, whether for protection of investment or otherwise; and
(iv) such other conditions as may be prescribed.’’.
CHAPTER III
AMENDMENT TO THE FINANCE ACT, 2012
23 of 2012. 3. In the Finance Act, 2012, in section 119, the following provisos shall be inserted, Amendment
namely:— of section
119.
"Provided that this section shall cease to apply to the person who fulfils the
following conditions, namely:—
(i) where such person has filed any appeal before an appellate forum or a
writ petition before the High Court or the Supreme Court against any order in
respect of said income, he shall, either withdraw or submit an undertaking to
withdraw such appeal or writ petition, in such form and manner as may be
prescribed;
(ii) where such person has initiated any proceeding for arbitration,
conciliation or mediation, or has given any notice thereof under any law for the
time being in force or under any agreement entered into by India with any other
country or territory outside India, whether for protection of investment or
otherwise, he shall either withdraw or submit an undertaking to withdraw the
claim, if any, in such proceedings or notice, in such form and manner as may be
prescribed;
(iii) such person shall furnish an undertaking, in such form and manner as
may be prescribed,waiving his right, whether direct or indirect, to seek or pursue
any remedy or any claim in relation to the said income which may otherwise be
available to him under any law for the time being in force, in equity, under any
statute or under any agreement entered into by India with any country or territory
outside India, whether for protection of investment or otherwise; and
(iv) such other conditions as may be prescribed:
Provided further that if any amount becomes refundable under the Income-tax
43 of 1961. Act, 1961 to the person referred to in first proviso as a consequence of him fulfilling
said conditions, such amount shall be refunded to him, but no interest under
section 244A of the Income-tax Act, 1961 shall be paid on that amount.".
————
ANOOP KUMAR MENDIRATTA,
Secretary to the Govt. of India.
UPLOADED BY THE MANAGER, GOVERNMENT OF INDIA PRESS, MINTO ROAD, NEW DELHI–110002
AND PUBLISHED BY THE CONTROLLER OF PUBLICATIONS, DELHI–110054.
MGIPMRND—719GI(S3)—13-08-2021.