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Fresh Rules Pave Way for Voda Retro Tax Dispute Settlement

India Thursday unveiled fresh rules paving the way for settlement of the retrospective tax dispute with British telecom firm Vodafone.

The Central Board of Direct Taxes notified ‘Relaxation of Validation (section 119 of the finance act) Rules prescribing the forms and conditions for the declaration to be filed by the company for setting its tax dispute, operationalizing the Taxation Laws amendment act passed in Parliament’s Monsoon session.

Vodafone’s tax demand in the tax dispute was validated under section 119, as distinct from the others and therefore a separate set of rules had to be notified. Conditions, prescribed under these rules, are akin to the ones issued earlier.

The company will have 45 days to file its application to settle its tax dispute from the date of notification. Separate rules had to be issued for Vodafone under Section 119 of the Finance Act as that dealt with “validation” of tax demands in its case, override the Supreme Court order in the company’s Favor. These rules now seek to relax this validation provision to essentially nullify the earlier tax demands raised.

“The rules are akin to the earlier rules notified on the procedural matters, relating to withdrawal matters, relating to withdrawal of indirect transfer provisions, as specified. These rules should address the technicalities linked to validation of notices under Sec 119 of Finance Act 2012,” said Vikas Vasal, National Managing Partner Tax, Grant Thornton Bharat.

As per the latest rules, Vodafone will have to furnish a declaration to the income tax department to indemnify the government and its affiliates against any further claim as also commit to not seek any damage while withdrawing all legal cases at various legal fora. S-ET

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