The government, however, amended the tax laws with retrospective effect to undo the Supreme Court judgement and claim taxes.
The Delhi high court directed the Centre and Foreign Investment Promotion Board on Friday to complete within two months, an inquiry into Hong Kong-based Hutchison Telecom allegedly holding more than the permissible 74 per cent stake in Hutch-Essar.
The company will spend Rs 10,141 crore to buy 15.5 per cent stake from minority investors.
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Faced with over Rs 11,200 crore (Rs 112 billion) tax liability, Vodafone India chief Analjit Singh on Thursday met Finance Minister P Chidambaram for the second time this week and expressed the hope that there will be clarity soon on the proposal to settle the dispute through conciliation.
Cash-strapped telco Vodafone Idea's proposal for investment of up to Rs 15,000 crore through foreign direct investment (FDI) has been approved by the Union government, according to officials. A top-level group, comprising representatives from the ministries of home affairs, external affairs, finance and commerce and industry, took the decision. The nod, which is an enabling provision, would help the financially-stressed company raise funds to pay up some of its dues linked to adjusted gross revenue (AGR), reduce debts and use the money for operational expenses.
Finance Minister P Chidambaram has asked UK-based Vodafone Group, which is facing a tax liability of over Rs 11,200 crore in India, to give its view on the long-pending matter in writing, a senior official said.
US-based technology major IBM is contesting a claim of the revenue department which has increased the company's taxable income substantially to around Rs 11,000 crore (Rs 110 billion).
The Hong Kong-based Hutchison Telecommunications International would record a profit of around HK$70 billion, once the sale of 67 per cent stake in Hutch-Essar is completed.
The Finance Ministry has already circulated a draft Cabinet note withdrawing the conciliation offer to Vodafone to resolve the Rs 20,000-crore (Rs 200-billion) tax dispute case.
India has challenged in a Singapore court a verdict of an international arbitration tribunal that overturned its demand for Rs 22,100 crore in back taxes from Vodafone Group Plc, sources said on Thursday. An international arbitration court had on September 25 rejected tax authorities' demand for Rs 22,100 crore in back taxes and penalties relating to the British telecom giant's 2007 acquisition of an Indian operator. Two sources privy to the development said India had 90 days to file an appeal against the tribunal award, and the same was done in a Singapore court earlier this week.
AG is of the view that there is no point in dragging the matter further when it has already been "struck down" by one international forum, and also by the top Indian court.
A bench headed by Justice H L Dattu, however, allowed the petitioner, former Additional Solicitor General Bishwajit Bhattacharyya, to file fresh petition with all the relevant documents stating what action Centre has so far been taken on the issue.
The Department of Telecom, Department of Industrial Policy and Promotion, Ministry of Home Affairs, Ministry of External Affairs and the Department of Economic Affairs had to give their comments on the proposal, sources said.
Vodafone, according to sources, in its response to the Finance Ministry's offer for conciliation, had expressed keenness to settle the long-pending capital gains tax dispute.
The Foreign Investment Promotion Board (FIPB) on Monday deferred a decision on Vodafone's Rs 10,141 crore (Rs 101.41 billion) proposal to buy out minority shareholders in its Indian arm as the Ministry of Home Affairs is yet to give its comments.
Cut-throat competition, high spectrum costs, and frequent flip-flops in government policies have made it difficult for Vodafone to make money in the country.
The letter was written on February 20, two weeks after the Cabinet Committee of Economic Affairs had approved the 100 per cent ownership proposal of Vodafone Plc in Vodafone India, at a proposed investment of Rs 10,141 crore (Rs 101.41 billion).
World's second largest mobile operator Vodafone Plc of UK on Tuesday sought FIPB approval to invest Rs 10,141 crore (Rs 101.41 billion) in raising its stake in the Indian arm to 100 per cent.
Vodafone Plc and its ex-shareholders have suffered due to the delay in an Initial Public Offer (IPO) of its Indian unit.
The retrospective tax controversy was highlighted by Vodafone, but Cairn Plc's continuing problems point to the impact this law has had on FDI in India's oil and gas sector.
The Bombay High Court on Thursday stayed a new income tax demand of Rs 3,000 crore (Rs 30 billion) on Vodafone India Services in an alleged transfer-pricing case from 2010-11.
Vodafone recently bought the 67 per cent stake held by Hutchison. The remaining equity is held by the Ruias.
Besides Vodafone, several other major MNCs like Nokia and Shell were locked in tax dispute with the revenue department.
The IPO is expected to bring handsome fees for the selected banks at a time when billion-dollar listings have become scarce
As top bosses of Vodafone and Essar arrived in Hong Kong to negotiate a deal for acquiring Hutchison Telecom's Indian business, its parent company has indicated it will not consider any offer below $14 billion.
The coming Union Budget might give relief to foreign portfolio investors from taxation on indirect transfers.
Granted 6-month relief, subject to interim payments and guarantee, on Rs 3,700-cr demand for alleged transfer pricing in FY09.
The government may be waiting for the outcome of an arbitration initiated against its levy of Rs 10,247 crore retrospective tax on UK's Cairn Energy Plc before deciding on appealing against losing a tax case against Vodafone Group, sources said. An international arbitral tribunal is expected to give a decree within next few days on Cairn Energy Plc's challenge to the Indian government seeking Rs 10,247 crore in retrospective taxes. If the arbitration award in the Cairn cases goes against India, the government has to pay the British firm over Rs 7,600 crore to reverse the dividend and tax refund it had ceased and shares it sold to recover part of the tax demand.
Based on Statista data for 2019, Vodafone has 17.2 million subscribers in the UK, 29.5 million in Germany, and over 13.7 million in Spain. Without Voda Idea, the Group will become smaller than Airtel and Jio.
Vodafone CEO Arun Sarin on Thursday met key members of the Ruia family, as part of efforts to woo the Essar Group to ensure smooth sailing of mobile venture Hutch-Essar, where the UK company is acquiring majority stake.
Country accounts for 38% of telco's global user base, 10% of total revenue
The race for Hutch-Essar, the country's fourth largest mobile service provider, quickened on Wednesday with Hong-Kong based Hutchison Telecommunications International Ltd formally informing the 4 companies in the fray to submit their bids by Friday
Vodafone's long-pending tax dispute with the government might be heading for a resolution, with the finance ministry considering changing the Income-Tax Act's retrospective amendment and taxing indirect transfer of assets prospectively from 2012, the year the law was clarified.
Continuing the efforts to strengthen its presence in telecom JV with Hutchison, Ruias' Essar Group is considering buying Max Telecom and IL&FS's 3.16 per cent stake in the Hutch-Essar joint venture.
Only 300 assessees came forward with disputed tax liabilities amounting to Rs 10,000 crore
Finance ministry officials said they were scrutinising many deals, but the actual tax liability would depend on many factors, including the kind of payment (royalty, interest, stake sale) and the Double Tax Avoidance Agreement with the country where the foreign company was based.
Representatives of the British telecom company on Friday met senior finance ministry officials, in search of an amicable solution.
Vodafone appointed to its board on Thursday a former group managing director at HTIL's parent company Hutchison Whampoa.
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