Wednesday, May 09, 2012

Pranab ticks off Vodafone, asserts parliament's right to overturn court verdict


New Delhi: Finance minister Pranab Mukherjee took the toughest stand that UPA2 has ever taken in the face of a defiant stance adopted by Vodafone, the British telecom major.

He made it clear that he would not yield to pressure and threat from multinational companies and other investors, and that the government is sticking to the stand that Vodafone is liable to pay the US11b capital gains tax for the majority shares it had acquired from the Hutch in its India telecom company. The deal was transacted in Cayman Islands. Supreme Court had ruled that Vodafone cannot be taxed for a deal made on assets lesewhere.
Replying to the debate on Finance Bill 2012 in Lok Sabha on Tuesday he said that parliament has every right to overturn a Supreme Court judgment and make amendments to existing law as well as pass new legislation. It is the inherent right of parliament to make law and the judiciary can only interpret.
Responding to BJP leader L.K.Advani's reference to black money, “My whole argument on Vodafone was that. Either you pay tax in the country of origin or pay tax here. No company can create subsidiaries in a third country for evading tax.” Citing existence of the Double Taxation Avoidance Agreement (DTAA), he said that India cannot be made a tax haven, a point which he hade made in his reply to the debate on Budget as well.

Mukherjee said that India would not hesitate to tax companies for frea of losing foreign direct investment (FDI). He said that a big country like India did not depend on FDI for its growth and said that substantial investment for India's development in recent decades had come from domestic savings.

Mukherjee said that the Supreme Court had delivered a judgment in favour of the Vodafone, but he reminded the House that it was parliament that made the law and the judiciary can only interpret it. Digging into his phenomenal memory, Mukherjee said that parliament had always amended law, including the Constitution.

He referred to the Golknath case where the Supreme Court had ruled that parliament can amend the Constitution but it cannot amend Part III containing the Fundamental Rights, and that the court had struck down social legilsation like bank nationalisation and abolition of privy purses. He said Indira Gandhi went to the people and asked for two-thirds majority which she got in the 1971 election. Then she brought in the Constitution 24th Amendment Bill, which empowered the parliament to amend any part of the Constitution.

Defending the rerospective effect of the amendment to the Income Tax Act which brought Vodafone in the tax net, he said that the amendment was only meant for clarifying the existing intent of the law. He said that in Britain the retrospective affect stretched back to 21 years and this was accepted practice in every parliamentary democracy, and if it is acceptable in Britain there is no reaosn why it cannot be so in India.


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