Terming payment of taxes as a 'mark of civilisation',Finance Minister P Chidambaram has assured that authorities will not "rashly" implement controversialretrospective tax rules while once again promising a non-adversarial tax regime for all taxpayers.

This is the second time in less than a week that Chidambaram has given assurances of a stable and fair tax regime, after the tax department attracted criticism for ushering in what some have called a "raid raj" and for introducing a series of measures industry and investors has slammed as retrograde.

At the heart of industry's unease with the tax policies are the General Anti-Avoidance Rules (GAAR) and an amendment to the tax laws that allows authorities to retrospectively levy taxes on all indirect transfers involving Indian assets. Faced with a backlash from industry and investors, the government has put the GAARproposal in deep freeze while it is yet to move ahead with implementing the retrospective tax provision.

Asked whether income-tax field officials had been given any instruction to issue tax notices to Vodafone or other such companies that face tax liability under the retrospective tax provisions, Chidambaram said the assessing officers would not act "rashly".

"I have not given any instruction to field officers... There is Section 119 (of the Income Tax Act), there is the Supreme Court judgement and there is opinion of attorney-general...," he told reporters.

 

Panel report helpful, says Chidambaram

All these have to be studied by the assessing officer and their supervisory officer. They are not going to act rashly. These are not small amounts on which you can take a rash decision. They will study all that," Chidambaram said.

The tax department's standoff with Vodafone Group Plc became the emblem of the retrospective tax issue after the authorities slapped a hefty tax demand on the British telecom company for its 2007 acquisition of Hutch-Essar, the Indian unit of Hong Kong's Hutchison Telecom. The companies in question argued that since the deal was executed overseas between two foreign entities, they did not have to pay taxes. But the tax department contended that the underlying asset was based in India and Vodafone should have deducted taxes before paying Hutchison.

The case went to the courts and the Supreme Court in January this year issued a judgement in Vodafone's favour. But former finance minister Pranab Mukherjee amended the Income Tax Act with retrospective effect to bring such overseas transactions involving underlying Indian assets into the tax net. However, tax authorities are yet to send any fresh communication to Vodafone to pay up the tax demand of Rs 11,218 crore. (Economic Times)