Validation clause: It is proposed to provide for validation of demands raised under the Income-tax Act in certain cases in respect of income accruing or arising, through or from transfer of a capital asset situate in India, in consequence of the transfer of a share or shares of a company registered or incorporated outside India or in consequence of agreement or otherwise outside India. It is proposed to provide through this validation clause that any notice sent or purporting to have been sent, taxes levied, demanded, assessed, imposed or collected or recovered during any period prior to coming into force of the validating clause shall be deemed to have been validly made and such notice or levy of tax shall not be called in question on the ground that the tax was not chargeable or any ground including that it is a tax on capital gains arising out of transactions which have taken place outside India. The validating clause shall operate notwithstanding anything contained in any judgment, decree or order of any Court or Tribunal or any Authority.

This validation shall take effect from coming into force of the Finance Act, 2012.


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  1. vswami says:

    All such proposals go to pinpoint one thing; that is, the Revenue is hellbent upon pursuing, with all vigor and vitality / force left at its command,   what , in the Revenue’s own words, was an idea mooted in reference to  inter alia the Vodafone case, simply by way of ”testing fresh waters’, To be precise, the recent indications are quite strong and unmistakably loud and clear. No doubt,  that the Revenue is determined to take forward the  idea of ‘testing’, to its end i.e.  unstoppable conclusion, howsoever it might be convincingly illogical  to do so, namely, – carrying on the objective of muddling the law. the legal regime to any extent as is humanly  possible. Despite, keeping aside, all talks and policies in recent times about attempting to simplifying the tax laws, saving the taxpayers from the most dreaded litigation ; obviating or at least /minimizing the scope for it through new found /propagated policies e.g. ‘NATIONAL LITIGATION POLICY’ ; unless the nomenclature itself, though amenable to a misconception, was deliberately chosen,  to be followed , as before, for all times to come. (A clue: Should the Policy, had, the real intention been otherwise,  have been named, –  National ante-litigation policy ?!)

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January 2021