Vedanta Settles Retrospective Tax Dispute with India

Vedanta Ltd said on Monday that the company and its group entities have withdrawn all their cases over retrospective tax demands from the revenue department to settle a nearly seven-year-old dispute with the government.

Given recent amendments that nullifies the retrospective tax imposed by the Finance Act, 2012, Vedanta and its all-related group entities have taken a step to settle the dispute over a March 11, 2015, order passed by the deputy commissioner of income tax, the Anil Agarwal-led metals and mining conglomerate said in a stock exchanges filing.

The announcement by the Vedanta will bear, “no cost, or accrue any (financial) gain” for the company, a person aware of the development said. “However, it will bring clarity to its balance sheet, “he added.

“Vedanta Ltd has withdrawn the income tax appeal pending before the Delhi bench of the Income Tax Appellate Tribunal and also withdrawn writ petition filed before the Delhi High Court… “the company said in its stock exchange filing.

“Vedanta Resources Ltd, the parent company of Vedanta Ltd, has also filed the application seeking withdrawal of the claim and termination of the arbitral proceedings pending before the Permanent Court for Arbitration in the International Court of Justice.”

The genesis of the dispute lies in a 2012 amendment of the Income Tax Act, which empowered the revenue department to impose a tax retrospectively as far back as 1961 on non-residents’ transfer of share of an overseas company deriving substantial value from assets in India.

The revenue department had raised a tax demand on cairn UK holdings for alleged capital gains it made in a 2006 business reorganization of its Indian entity, cairn Energy Pic, and Vedanta, which had acquired cairn India from its parent company in 2011.

The government has taken a landmark step by introducing Taxation Laws (Amendment) Act for reversal of retrospective tax, which has brought lots of certainty in the tax regime, “said Paras Savla, partner at KPB & Associates, a tax advisory firm.S-ET

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