About: Finance Act 2012 imposed tax liability on gains arising from indirect transfer of Indian assets with retrospective effect. The 2012 amendment was passed to overturn the Supreme Court verdict in the Vodafone case which held that gains arising from indirect transfer of Indian assets are not taxable under the then existing provisions of the Income Tax Act 1961.
Detail: After that, the provisions of the Income-tax Act, 1961 were amended by the Finance Act, 2012 with retrospective effect, to clarify that gains arising from sale of share of a foreign company is taxable in India if such share, directly or indirectly, derives its value substantially from the assets located in India. The Finance Act, 2012 also provided for validation of demand, etc. under the Income-tax Act, 1961 for cases relating to indirect transfer of Indian assets.
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