The supreme court on Tuesday dismissed the union government’s petition seeking review of its judgment in the Vodafone tax case - giving the much needed consistency and finality to its earlier said judgment.

The fine print of the newest order is not yet available and thus reliance has been placed on newsreports. 

Following the verdict of the supreme court on January 20 in the Vodafone Tax Case, directing the tax department to return the sum of Rs 2,500 crores deposited by Vodafone along with the interest at the rate of 4 percent and a bank guarantee to the tune of Rs 8,500 Crores, the government had filed a review petition.

While the tax department had contended that the deal was subject to capital gain tax in India as most of the operating company assets were located in India, the supreme court had dismissed the contention, giving a lesson to the taxman on the basic principles of taxation including jurisdiction of the tax authorities and the scope and ambit of section 9 of the Income Tax Act, 1961 on offshore transactions.

The ruling of the supreme court has strengthened the consistency and predictability of applicable tax provisions concerning foreign investments and India's responsibility to commit to and enforce provisions of international and bilateral treaties on the issue to which the country was a signatory including a multitude of Double Taxation Avoidance Agreements (DTAAs).

The supreme court may review its own verdict under Article 137 read with the provisions of civil procedure code, 1908 only in the following cases:

i. Discovery of new and important matters of evidence: The union government had to show that there was a discovery of a new and important matter of evidence. The attempt of the finance ministry to thrust of purported legislative intent of 1962, after fifty years in the budget of 2012 while the pendency of review the petition indicated the desperation of central government to create a discovery of such a new and important matter, in the light of which it intended to propose review of the Vodafone tax judgment.

ii. Error apparent on record: The union government had to make out a case of an error apparent in the face of the supreme court judgment. Such an error must be self-evident.

iii. Other sufficient reasons: The union government had to establish that the judgments by the supreme court would have resulted in miscarriage of justice and that there was grave and palpable error in the judgment

Therefore, a review of the judgment by the supreme court would only be entertained if only one of the above cases is established.

Far from proving the above, the finance ministry's review petition which would have thrust the legislative intent behind schedule by over fifty years (thge ministry was not being mindful of the due process of law) did not deserve anything but dismissal.

A related fallout of the dismissal of the review petition would be on the attempt by the finance Ministry to enforce its now created/discover fifty years old legislative intended section 9 of Income Tax 1961, with effect from 1962.

The supreme court’s consistent views on retrospective application of laws particularly in cases of change in laws are far different from what finance ministry had proposed in the budget of 2012. In my earlier submission on this website, I had expressed my doubts on the legal validity of the amendment proposed to section 9 with retrospective effect in the budget of 2012.

Bearing out my views, the supreme court’s dismissal of the review petition clearly indicates the continued consistency of the supreme court’s view on the subject and paves the way for prospective applicability of any such amendment/clarification to section 9 under the budget of 2012

The repeated attempts by the union government to wriggle out the directions given out by the apex court in the Vodafone tax case had started affecting the finality and enforceability of the directions of the supreme court apart from eroding confidence in the last mile justice from the Indian judicial system.

The supreme court dismissal of the review petition is a very welcome development. Hopefully, the tax department and the finance ministry will now keep aside the pettiness and short-sighted priorities and recognise that delays and enforcement of the order of the court entails denials of justice and would refrain from making every investor run to the supreme court for justice.