Benefit to Foreign investors
The Centre clarified that foreign portfolio investors (FPIs) would not have to pay tax in India for assets sold overseas even if the underlying value is derived from Indian assets, providing a breather to such entities.
The provision was introduced to deal with cases like Vodafone wherein the telecom major acquired the business of Hutchison Essar but refused to pay any tax in India since the acquisition was done overseas. Tax authorities issued a notice to Vodafone on grounds that the value of the transaction was derived from assets in India. However, later on, no tax was levied on this transaction.