Cairn Energy has brought a lawsuit in a US court that potentially can lead to seizing of Air India’s overseas assets such as airplanes to recover USD 1.72 billion from the Indian government which an international arbitration tribunal had awarded after overturning levy of retrospective taxes.
Daily Current Affairs Quiz 2021
The term retrospective means to look back on something that has occurred in the past. So, the term retrospective tax means to pay tax for goods and services purchased in the past or income earned in the past.
This may happen due to laws being amended or new rules of taxation being introduced in an economy.
A retrospective tax is usually caveated with a validation clause. It helps validate the demand for a retrospective tax payment made by one party and the decision or order passed by the country’s concerned tax authority.
For example, the Supreme Court of India clearly states that you cannot add a new tax liability in retrospect. That is why it is accompanied by the validation clause that serves to verify the demand and pass a judgment.
India retrospectively amended its taxation laws through the Finance Act of 2012, permitting tax authorities to reopen and/or investigate transactions from 2006 for evasion of capital gains tax.
