A sigh of relief was heard around corporate India when finance minister Arun Jaitley said that he would be forming a committee to deal with cases of retrospective taxation and also indicated that he would do away with the provision, once pending cases are dealt with. This relief was, however, not shared by a plethora of politicians from Punjab, Jaitley's home state, who made a beeline for the finance minister's office in Parliament on Monday.
Their grievance was very simple and related to a case which dates back to 2007, when a society was floated by a host of Punjabi politicians cutting across party lines.
This society, which had former Union minister Preneet Kaur (wife of Amritsar MP Amarinder Singh), MP Santosh Chaudhary, deputy chief minister of Punjab Sukhbir Singh Badal and his estranged cousin Manpreet Badal, and former deputy Speaker of the Lok Sabha Charanjit Singh Atwal, as members held 21.2 acres of prized real estate in Chandigarh.
In February 2007, the society entered into a "tripartite Joint Development Agreement (JDA)" with HASH Builders private limited and Tata Housing Development Company Ltd. Under the agreement, the society signed off on transferring its land to the developers in lieu of a four bedroom flat and Rs 82.50 lakh in cash for each member.
The grand plans were, according to top sources in the finance ministry, halted by a writ petition filed in the Supreme Court, due to which the Court has asked Tata to maintain status quo and make sure that "even a brick should not laid in the area." The apex court then referred the matter to the Delhi high court. To make matters worse the Chandigarh administration has told the high court that "political and business interests influenced the Punjab government's decision to clear the project."
"The unkindest cut however, was yet to come," said the source in the finance ministry. The Income Tax (IT) department citing provisions of transfer as defined in Clause (v) of Section 2(47)2 of the Income Tax Act, 1961 and held that the land owners were liable to pay capital gains tax on their share of the gain from the agreement.
Not just, that the assessing officer has held that the transfer arose pursuant to the JDA executed in February 2007. Accordingly, the entire amount of consideration was taxed in assessment year 2007-08. Thus the politicians were told that not only was there a legal impediment to their gaining new flats but that they were now liable to pay huge sums as tax, that too from 2007 onwards.
The Commissioner of Income Tax Appeals confirmed the Assessing Officer's orders, which was followed by a 165 page ruling by the Chandigarh Bench of the I-T Appellate Tribunal in the case of Charanjit Singh Atwal on the development agreement taxability.
This brings us back to Monday and a delegation of these leaders who made a beeline to the finance minister, who is country cousin and a close political ally of some of the members. Sources said that the finance minister heard them out, but he reportedly told them that he was unable to help them as he was opposed to retrospective changes in tax laws or orders. Quite clearly, retrospective tax cuts both ways.http://economictimes.indiatimes.com/news/politics-and-nation/arun-jaitley-hints-at-doing-away-with-retrospective-tax/articleshow/38573602.cms?prtpage=1