The draft rules for the Taxation Laws (Amendment) Act, 2021, which would end the retrospective tax disputes with Cairn Energy and Vodafone Plc, commits to refund the principal sum within a 30-day time period after compliance of all formalities.

The companies concerned have to give an “irrevocable” undertaking to withdraw all legal cases against the government as well as undertake not to pursue any in the future.

The Central Board of Direct Taxes (CBDT) has released the draft rules that specify the conditions to be fulfilled and the process to be followed to give effect to the amendment made by the 2021 Act.

The CBDT sought comments from all stakeholders and the public by September 4.

According to the proposed rule 11UE(5), the assessing officer shall issue a refund within 30 days of getting a direction from the Principal Commissioner or Commissioner of Income Tax.

Tax experts said this should give some confidence to firms such as Cairn Energy and Vodafone to avail the offer, even though the forms were quite cumbersome.

During the Monsoon session, Parliament had passed the Taxation Laws (Amendment) Bill, 2021 seeking to nullify the controversial retrospective tax provision introduced in 2012 under the UPA government. The move is aimed at ending tax disputes with Vodafone, Cairn Energy and over a dozen other companies, besides facilitating fresh foreign investment.

Subsequent to the amendment in the Income Tax Act in 2012 applying the provision retrospectively, income-tax demand had been raised in 17 cases. In two cases, assessments are pending because of a stay granted by the high court.

Of the 17 cases, arbitration under the Bilateral Investment Protection Treaty with the United Kingdom and the Netherlands had been invoked in four cases. In two cases, the Arbitration Tribunal ruled in favour of the taxpayer and against the I-T department.

Finance secretary T.V. Somanathan said a total of Rs 8,100 crore was collected using the retrospective tax legislation. Of this, Rs 7,900 crore was from Cairn Energy alone. This money will be repaid. As much as Rs 1.10 lakh crore in back taxes was sought from 17 entities that were levied taxes using the 2012 legislation. Of these, major recoveries were made only from Cairn.

Tax advocate Narayan Jain said: “The draft rules prepared by CBDT run into as many as 30 pages. These should be simplified and made crisp.”

“The parties concerned as well as the income tax department should cohesively work so that litigations come to an end and eligible parties get refund of tax paid by them without any hassle or delay. The underlying principle of ease of doing business needs to be followed in its spirit even in such income tax matters,” he added.

Sandeep Jhunjhunwala, partner at Nangia Andersen LLP, said: “Any dispute with respect to any of the prescribed forms or orders under these rules would be governed by the Indian laws and theIndian courts would have the exclusive jurisdiction to decide disputes.”