The Supreme Court’s dismissal of the government challenge of Vodafone verdict is not the end of the dispute. The next round will start once the Parliament passes the retrospective legislation on tax on foreign transactions of domestic assets. The newly introduced amendment, brought by the Finance Minister aims to make overseas transfer of underlying Indian assets taxable in India.
Indeed, the government now is well equipped with the ammunition to face the overseas deal on Indian assets with the passage of the change. There is more clarity on the taxation right for government of India. The amendment also changed the dispute scenario completely in favour of the taxation department.
The Supreme Court now has to examine the issue in the background of the new law. Till now, it was a battle between, the executive and Vodafone in background of a confusing legislation. But the legislation is made powerful now, and the Supreme Court will have to examine the dispute in the context of the new legislative provisions.
Next step is tax department sending notice to Vodafone to pay taxes it ought to pay under the revised law.
In reply to the notice, Vodafone will approach the Supreme Court, and then the second round of the battle begins. Here, Vodafone may argue that the amended legislation is ‘selective’ on them. The multinational company may postulate that the government has introduced the change in the context of the existing favorable verdict for Vodafone. Hence, they may argue that the amendment is unconstitutional.