Common-sense dictates that when MNCs (multinational corporations) contract offshore deals, the capital gain if any, accrues beyond Indian jurisdiction. Yet circa 2010, by convoluted reasoning for which India’s income tax department is infamous, it calculated pro rata capital gains for 17 MNCs including Vodafone, Netherlands and Cairn Energy (UK), levying capital gains tax on their Indian subsidiaries.
Unsurprisingly in 2013 the Supreme Court upheld an appeal filed by Vodafone (India) against the income tax department’s levy of capital gains tax plus interest of Rs.11,217 crore. Enter the late Pranab Mukherjee, the worst Union finance minister in the history of independent India.
Seething with nationalist fervour and disregarding the advice of prime minister Manmohan Singh (whose leadership he never acknowledged), Mukherjee amended the annual Finance Act, invoking national sovereignty to override the Supreme Court judgement. But Vodafone citing a bilateral India-Netherlands treaty went in appeal to the Court of International Arbitration at the Hague, and again won a favourable verdict. Recently, to prevent wrongly taxed companies from seizing and selling national assets abroad, the BJP/NDA government repealed the retrospective taxation legislation passed by the Congress-led UPA government in 2012. Meanwhile, India’s reputation as a safe destination for foreign investors has been severely damaged.
As editor of Businessworld, I was the first journalist to interview Mukherjee, a lecturer in an obscure college in Kolkata, when he was first appointed Union finance minister in 1984. Never before or since have I met a more confused top-level government official. His every next sentence contradicted the previous one. That such an apotheosis of mediocrity almost became prime minister and ended his days in Rashtrapati Bhavan with its 16-acre rose garden, explains the pathetic condition of the masses and the country’s pitiable also-ran international status.
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