Taxmann’s Analysis of the Taxation Laws (Amendment) Bill, 2021

  • Blog|News|Income Tax|
  • 2 Min Read
  • By Taxmann
  • |
  • Last Updated on 7 August, 2021

Taxation Laws (Amendment) Bill 2021

The issue of taxability of income, arising on indirect transfer of assets located in India due to the transfer of the shares of a foreign company, was a subject matter of prolonged litigation. This issue first time arose in the case of Vodafone International Holdings. In 2006, Vodafone International Holding (Vodafone) and Hutchison Telecommunication International Limited (HTIL) entered into a transaction by which HTIL transferred the share capital of its Cayman Islands based subsidiary company to Vodafone. By this transaction, Vodafone indirectly acquired a controlling interest of 67 percent in Hutchison Essar Limited (HEL), an Indian Joint venture company.

The Income-tax Department in 2007 served a notice to Vodafone for its alleged failure to deduct withholding tax from the consideration paid to HTIL. The controversy finally settled in favour of Vodafone by the Supreme Court. The Supreme Court had ruled in favour of Vodafone that it was not liable to deduct tax as gains arising to HTIL from indirect transfer of Indian assets was not chargeable to tax in India

However later, the Govt. amended the provisions of Section 9 by the Finance Act, 2012 with retrospective effect. The Finance Act, 2012 inserted Explanation 4 and Explanation 5 to Section 9(1)(i) with retrospective effect from 01-04-1962. The amendment has clarified that gains arising from the sale of shares of a foreign company are taxable in India if such shares, directly or indirectly, derive their value substantially from the assets located in India. The Govt. had termed the amendments as clarificatory in nature.
These clarificatory retrospective amendments and consequent demand continue to be a sore point with the potential investors. Thus, the Govt. has introduced the Taxation Laws (Amendment) Bill, 2021 in the parliament to propose revocation of the amendments made in Section 9. A snippet of changes proposed by the Taxation Laws (Amendment) Bill, 2021 is presented in this article.

Read Taxmann's Analysis

Get the Full Copy of the TLA Bill, 2021

Disclaimer: The content/information published on the website is only for general information of the user and shall not be construed as legal advice. While the Taxmann has exercised reasonable efforts to ensure the veracity of information/content published, Taxmann shall be under no liability in any manner whatsoever for incorrect information, if any.

Leave a Reply

Your email address will not be published. Required fields are marked *

Everything on Tax and Corporate Laws of India

To subscribe to our weekly newsletter please log in/register on

Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied