TRC among 14 I-T retro amendments

Last year's Budget saw 34 such amendments

The controversial tax residency certificate (TRC) issue is part of the 14 retrospective income tax amendments proposed in this Budget. Last year, Pranab Mukherjee as the finance minister had brought in as many as 34 retrospective I-T amendments, including the one that could tax Vodafone’s takeover of Hutch in India and similar transactions going back to 1962.

The amendments, four of them, related to TRC or section 90 of the I-T Act relating to agreement with foreign countries or specified territories will take effect retrospectively from April 1, 2013 (for the assessment year 2013-14), according to the Finance Bill 2013. The amendment will be for transactions conducted 2012-13 onwards, and therefore restrospective.        
Pointing out that TRC, which triggered negative market reaction followed by government clarification, was the most significant retrospective amendment this time, Rahul Garg, leader direct taxes, PricewaterhouseCoopers (PwC), said the others were more procedural in nature. He added that there should be concern over retrospective provisions when a citizen is put in a worse situation.

In the case of amendments related to TRC, Garg argued that as a citizen one can’t quarrel over what was written on the blackboard but not given on a piece of paper. Tax payers were already informed about the TRC changes last Budget through its explanatory memorandum to the Finance Bill. This year, it’s part of the Bill. So while the decision was taken last year, it has been enacted now.        

Experts maintained that every Budget has its share of retro amendments, but when it is primarily for procedural reason, there’s nothing wrong with it.

Apart from the ones linked to TRC, the other retro amendments brought in by finance minister P Chidambaram include changes in definition of venture capital undertakings, exemption with respect to any income of the National Financial Holdings Company, reference to Dispute Resolution Panel, procedure on receipt application by Authority for Advance Rulings, on appealable orders before commissioner (appeals), and appeals to the Appellate Tribunal.

All the retrospective amendments in the Finance Bill 2013 are to take effect from April 1, 2013. In contrast, the retro amendments of last year spanned across decades, starting with 1962 for Vodafone like transactions.

On the TRC amendment, Chidambaram clarified today that production of a TRC will be accepted as evidence of residence status.