Pranab: We have 'Very powerful, strong PM'

Finance Minister Pranab Mukherjee has made clear that US business and industry's fears on India's tax regime, particularly the recent retrospective tax proposals, are totally unfounded.

He added that he had clarified this issue in no uncertain terms with US Treasury Secretary Timothy Geithner during their bilateral meeting.

Mukherjee, in an interaction with journalists at the conclusion of his four-day trip to Washington to attend the World Bank/International Monetary Fund spring meetings, responding to a pointed question from rediff.com said, "I have explained this position - the implications of the retrospective effect - in that this is not a substantive amendment, (but) this is a clarificatory amendment, which expresses the intention of the legislation that will have to be effective from the date of enactment of law."

"Naturally, it will have to be with the reference point of the date of enactment, but this is not a substantive(amendment)," he reiterated.

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Mukherjee asserted that "apprehensions that the large number of tax cases will be reopened because of the restrospective amendment of that particular section is totally unfounded," he said, "because other laws - other section of the Income Tax Act - clearly state that no case can be reopened beyond six years."

Moreover," he added, "it has been clarified by the board of Direct Taxes and the Department of Revenue - the assessment process, which has been completed by April 1, 2012 - that those assessment cases will not be reopened."

Thus, he reiterated, "the apprehension that large number of cases will be reopened is misplaced."

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A Treasury spokesman of a read-out of the bilateral between Geithner and Mukherjee said, "Secretary Geithner and finance minister Mukherjee discussed a broad range of global and bilateral macroeconomic and financial issues, including issues with regard to foreign investment and tax matters."

"The Secretary encouraged Mukherjee to reassure foreign investors that India will continue to welcome foreign capital, by advancing important economic reforms that will increase opportunities for bilateral trade and investment, and strengthen India's business climate through greater transparency and predictability."

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The spokesman said, "In this regard, the Secretary noted that certain tax provisions in India's fiscal year 2013 budget have raised significant concern amongst US industry and dampened enthusiasm about India's investment climate."

"Secretary Geithner also noted that the Treasury Department is examining India's proposed tax provisions to determine their impact on the US-India bilateral income tax treaty," he added.

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When it was pointed out that letters by the head of the US-India Business Council and other American trade and investment groups had in a missive to the White House, argued that some of these alleged draconian measures were the result of a "vacuum" in India's leadership and the consequence of the Congress Party's ignominious defeats at the recent elections, Mukherjee erupted and strongly defended the leadership of Prime Minister Manmohan Singh.

"How can I comment on the perception of some organisation or some institution," he said. "I can only state the fact that there is no vacuum in the leadership of the Indian government."

Mukherjee asserted that "there is a very powerful, strong, and acceptable prime minister."