May 8, 2012

Amendment to Union Budget 2012-13

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Amendments to Union Budget 2012-13
The Finance Minister, Mr. Pranab Mukherjee, tabled the Union Budget 2012-13 proposals, on 16th March, 2012. (Click here to download our analysis on Union Budget 2012-13 proposals dated 16th March, 2012). The Finance Minister, in its Union Budget 2012 – 13, introduced certain international tax provisions to curb the tax avoidance. However, such introductions of new provisions and retrospective clarificatory amendments, raised concerns on the adverse impact it could have on the investment and business environment in India. Therefore, the Finance Minister, on 7th May, 2012 announced certain changes to such international tax provisions majorly by withdrawing GAAR. However, the Finance Minister has asserted that despite Supreme Court interpretation of law; the parliament has powers to make legislative amendments and the retrospective amendment in section 9 of Income Tax Act, 1961 taking indirect transfer of capital assets in India shall stay. This would not be considered as re-opening of cases where final assessments has been concluded and a formal circular by Central Board of Direct Taxes (CBDT) will follow in this respect. Certain other pitfall in Section 56 pertaining to taxing capital receipts above its Fair Market Value (FMV) in case of certain ‘Angel’ Investors is also a good move.
We welcome the proposed steps of Finance Minister, however, for sustaining High Growth Fiscal Consolidation is necessary and political will for fast track of policy reforms and important statutory legislations is a must.
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