Draft notification for framing of rules for the amendments made by the Taxation Laws (Amendment) Act, 2021

Last updated: 02 September 2021

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New draft rules have been released concerning amendments made by the Taxation Laws (Amendment) Act, 2021. These amendments aim to provide tax certainty regarding offshore indirect transfers of Indian assets that occurred before 28th May 2012. The rules outline conditions for nullifying tax demands and refunding amounts collected, provided pending litigation is withdrawn. Stakeholders are invited to submit comments on the draft notification by 4th September 2021.

The Taxation Laws (Amendment) Act, 2021 (2021 Act), which received the assent of the President on the 13^th August, 2021, has, inter-alia, amended the Income-tax Act, 1961 (Income-tax Act) so as to provide that no tax demand shall be raised in future on the basis of the amendment to section 9 of the Income-tax Act made vide Finance Act, 2012 for any offshore indirect transfer of Indian assets if the transaction was undertaken before 28^th May, 2012 (i.e., the date on which the Finance Bill, 2012 received the assent of the President).

The amendment made by 2021 Act also provides that the demand raised for offshore indirect transfer of Indian assets made before 28^th May, 2012 (including the validation of demand provided under Section 119 of the Finance Act 2012) shall be nullified on fulfillment of specified conditions such as withdrawal or furnishing of undertaking for withdrawal of pending litigation and furnishing of an undertaking to the effect that no claim for cost, damages, interest, etc. shall be filed and such other conditions are fulfilled as may be prescribed. The amount paid/collected in these cases shall be refunded, without any interest, on fulfillment of the said conditions.

Tax Law Amendments: New Rules for Offshore Indirect Transfers

The aim of the amendment made by the 2021 Act is to bring tax certainty and ensure that once specified conditions are fulfilled, the pending Income-tax proceedings shall be withdrawn, demand, if any, raised shall be nullified, and amount, if any, collected shall be refunded to the taxpayer without any interest. To implement the amendment made by 2021 Act, draft rules have been prepared to amend the Income-tax Rules, 1962 which specify the conditions to be fulfilled and the process to be followed to give effect to the amendment made by the 2021 Act.

The draft notification containing the proposed rules is placed in public domain and can be accessed at www.incometaxindia.gov.in.

Suggestions/comments on the draft notification are invited from all stakeholders and the public and can be furnished electronically at the email address ustpl1@nic.in latest by 4^th September, 2021.

FAQ :

The Act aims to provide tax certainty by preventing future tax demands on offshore indirect transfers of Indian assets made before 28th May 2012 and nullifying existing demands under specific conditions.

Conditions include withdrawing or undertaking to withdraw pending litigation, and providing an undertaking not to file claims for costs, damages, or interest, along with fulfilling other prescribed conditions.

No, any amounts paid or collected will be refunded without any interest, upon fulfilment of the specified conditions.

The draft notification containing the proposed rules can be accessed on the official website: www.incometaxindia.gov.in.

Suggestions and comments can be furnished electronically to ustpl1@nic.in.

The deadline for submitting comments is 4th September 2021.

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