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Individual income tax returm form by IRS, concept for taxation (Photo: istock)
Individual income tax returm form by IRS, concept for taxation (Photo: istock)

Just too taxing

Though our taxman seems convinced of India’s case, that all assets bought anywhere that yield returns off domestic operations should be subject to Indian capital-gain levies, the fact that our law was tweaked to clarify this only after that deal was done made the tax claim too weak to pass legal muster globally

According to news agency reports, the government has challenged the order of an international arbitration court that went in favour of the UK’s Vodafone Plc, which had contested a tax bill of 22,000 crore slapped retrospectively on its 2007 acquisition of a telecom firm in India through an overseas deal. The appeal, filed in Singapore, was not entirely unexpected, given the determination with which our tax authorities have tried to make Vodafone cough up the money.

It’s an ill-considered move all the same. Though our taxman seems convinced of India’s case, that all assets bought anywhere that yield returns off domestic operations should be subject to Indian capital-gain levies, the fact that our law was tweaked to clarify this only after that deal was done made the tax claim too weak to pass legal muster globally. Rather than get deeper into litigation over it, the government should now disentangle itself from the dispute. It’s much too taxing, and in too many ways. This case has already tarnished India’s image as a country with a stable taxation regime. We must not have investors worry that nasty surprises can be sprung upon them just to fill state coffers a bit.

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