New Delhi: Arbitration court against Government of India (Tax Dispute Case) in the Income Tax Department’s tax demand case of Rs 22,100 crore under tax law implemented by UK telecom company Vodafone Group plc. Have won in the cases fought in An international arbitration tribunal on Friday ruled that India’s demand for tax from the previous date is against fair dealing under the bilateral investment protection agreement.
“The verdict is confidential but Vodafone can confirm that the tribunal has found things in Vodafone’s favor,” Vodafone Group said in a statement. It is not yet known whether the Indian government will accept the decision of the arbitration court. Sources associated with the case said that the liability of the Government of India in the case would be up to Rs 75 crore. This includes a cost of Rs 30 crore and a tax refund of Rs 45 crore.
Vodafone had challenged in the arbitration court against the tax demand made by the Government of India under the taxation law from the previous date. The government, through a law passed in 2012, acquired the right to levy taxes on the previous date. Under the same law, the government had demanded capital gains in a $ 11 billion deal by Vodafone to buy a 67 percent stake in Hutchison Whampoo’s mobile phone business. The deal was signed in 2007 between Vodafone and Hutchison.
The company challenged the Indian government’s tax demand under the Netherlands-India Bilateral Investment Treaty (BIT) in an international arbitration court. The company was demanded Rs 7,990 crore (including interest and penalties including Rs 22,100 crore) as capital gains tax in the deal.
Sources said the tax demand was on the listed company in the UK and Vodafone has no liability for the Indian venture. Vodafone merged its Indian telecom operations with industrialist Kumar Mangalam Birla’s company Idea. But the company that came into existence after the merger, Vodafone Idea Ltd. Struggling with the previous government dues demand of $ 7.8 billion.
The tax authority issued a notice to Vodafone International Holdings BV in September 2007. In the notice, Hutchison Telecommunications International Ltd. Was said to have failed to deduct the withholding tax (tax deducted at source) on the payment made for its stake purchase.
Vodafone challenged this notice in the Supreme Court, which disposed of the case in 2012, stating that the deal was not taxed in India and the company had no obligation to withholdholding tax. Thereafter, in May the same year, Parliament passed the Finance Act 2012 in which the various provisions of the Income Tax Act 1961 were amended along with the tax from the previous date.
Through this, it has been arranged that if there is a transfer of shares in a foreign company in any transaction earning from properties in India, then the profit from such deal can be taxed from the previous date. After this, the company was given a tax notice of Rs 14,200 crore in January 2013 by charging interest over the principal amount of tax.
A year later, Vodafone challenged the tax demand at the Netherlands BIT. Sources said that the company served a mediation notice in April 2014 after the case was not resolved outside the court. In 2016, the tax department gave a notice demanding tax of Rs 22,100 crore.
Vodafone always kept saying that no liability was incurred on it and that Vodafone India Limited. Will continue to strongly oppose the demand being made for the Hutchison deal.
Apart from Vodafone, the Indian government had demanded Rs 10,247 crore from Cairn Energy, a UK oil exploration company, using tax laws from an earlier date. This demand was made from the company in 2006 to restructure its Indian business.
