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India remains open to foreign investment despite concerns over changes in tax law: Ahluwalia

April 4, 2012 - Boao

Indian Planning Commission Deputy Chairman Montek Singh Ahluwalia has said the country remains open to foreign investment, despite a series of moves that have alarmed many international business groups, and scared away some funds from the stock market.

"There's absolutely no question of India having turned against foreign investment," Ahluwalia said in an interview on the sidelines of the Boao Forum for Asia in China's southern island province of Hainan.

"The policy remains one of strongly encouraging foreign direct investment, and also portfolio investment, into India," The Wall Street Journal quoted him, as saying.

Foreign companies are growing increasingly anxious about new business risks in India after new tax proposals in the national budget, one of which would allow authorities potentially to tax transactions dating to 1962 in which an Indian asset has been transferred between foreign entities.

That essentially would override an Indian Supreme Court ruling in January that U.K. mobile-phone company Vodafone is not liable for more than 2 billion dollars in taxes on the 2007 deal it struck to enter India.

According to the paper, Ahluwalia said such concerns are overblown, and noted that the law itself governing such transactions hasn't changed: At issue is the interpretation of the legislation.

"We're saying that as long as the asset is in India it's taxable, and whoever's buying the thing better pay the withholding tax," the paper quoted Ahluwalia, as saying.

"The tax should be factored into the deal," he added.


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