In a measure that will have far- reaching impact on foreign investment and the Vodafone case having a tax implication of Rs 11,000 crore, the government today proposed amendment in the Income Tax Act retrospectively from April 1, 1962.

Under the proposed amendment, all persons, whether resident or non-residents, having business connection in India will be required to deduct tax at source and pay it to the government even if the transaction is executed on a foreign soil.

The amendment will apply to all past transactions concerning assets in India.

Commenting on the government move, PwC Direct Tax Leader Rahul Garg said: "This amendment is to seek an overturn to the ruling of the Supreme Court judgment on mainly two cases-- Vodafone and Azadi Bachao Andolan."

In the Azadi Bachao Andolan case, it was held that an entity having a tax remittance certificate from Mauritius would be exempt from paying tax in India.

The changes in the Income Tax Act, according to experts, will also have a bearing on about 500 overseas deals of similar kind, experts said.

As per the proposed changes in IT Act, 1961, any asset which is registered or incorporated outside India shall be deemed to be situated in India "if the share or interest derives, directly or indirectly, its value substantially from the assets located in India.

"These amendments will take effect retrospectively from April 1, 1962 and will accordingly apply in relation to the assessment year 1962-63 and subsequent assessment years," says the Memorandum to the Finance Bill, 2012.

The amendment may have implications on Vodafone case in which the Supreme Court had held that the Income Tax department does not have the jurisdiction to levy Rs 11,000 crore as withholding tax on Vodafone for its USD 11 billion acquisition deal with Hutchison Essar in 2007. (Economic Times)