British telecom giant Vodafone Group plc on Friday won an arbitration against the Indian government over a demand for Rs 22,100 crore in taxes using retrospective legislation.
The arbitration clause is present in almost 95 per cent of corporate agreements, according to tax and audit firm Ernst & Young.
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).
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.
The British telecom major has disputed the tax demand over its acquisition of 67 per cent stake in Hutchison, now called Vodafone India, arguing that no tax was due as the transaction was conducted offshore.
To decide whether capital gains on surrender of call options are taxable
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.
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.
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.
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.
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.
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.
A court ruled in favour of Vodafone on Friday in a long-running dispute with the Indian taxman, a boost for the British telecom group whose tax battles have been seen as emblematic of the troubles facing foreign investors in India.
Vodafone pleaded in High Court that IT department had no jurisdiction in the transfer pricing case because the said transaction was not international and did not attract tax.
The Finance Ministry is of the opinion that Vodafone might drag its tax dispute to court.
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.
Besides Vodafone, several other major MNCs like Nokia and Shell were locked in tax dispute with the revenue department.
India is believed to have challenged in a court in The Hague an arbitration tribunal verdict that overturned its demand for Rs 10,247 crore in back taxes from Cairn Energy Plc -- the second time in three months that it has refused to accept an international award against retrospective tax.
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.
Country accounts for 38% of telco's global user base, 10% of total revenue
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.
Finance Minister Arun Jaitley, in his Budget speech on Monday, announced a new dispute resolution mechanism for such companies who are in confrontation with the taxman's action.
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 promises of netas and babus and new laws, however well-meaning, mean little.' 'What matters is implementation on the ground.' 'Every law is finally implemented by a vast army of offici
CBDT circular issued last month had raised multiple taxation concerns.
The exploration and production assets of Essar Oil will not be part of the Rosneft deal and would continue to remain with the Group.
The manner in which India has allowed the rule of law to be subverted for over eight years is tragic, notes former additional solicitor general of India Bishwajit Bhattacharyya.
Sachin Bansal, who had co-founded Flipkart with Binny Bansal in 2007, would exit the company
Over the years, Mr Singh has got in and out of innumerable businesses, cutting across sectors. He is one businessman who I have always found to be in a start-up mode, says Bhupesh Bhandari.
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