Jul 11 2014 : The Economic Times (Bangalore)
IN FOCUS - NO RETRO RELIEF FOR VODA IN TAX DISPUTE
ANANDITA SINGH MANKOTIA
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NEW DELHI
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Those hoping for a scrapping of retrospective tax changes by finance minister Arun Jaitley in the budget were in for a disappointment. India and UK's Vodafone Group continue to be locked in their dispute after the finance minister held back from reversing the 2012 amendment. The telecom company reacted by saying it will continue the process of international arbitration to resolve the Rs20,000 crore tax dispute. Jaitley broadly hinted at the ongoing tax dispute with Vodafone in his budget speech.Si nce “t he ret rospective a mend ment of Income Ta x Act 19 61 was under taken by Finance Bill 2012, a few cases have come up in different courts and legal fora. These cases are at different stage of pendency and will naturally reach their logical conclusion.“ He, however, pledged that the NDA government will not bring about any change retrospectively that creates a fresh liability.
A local tax official said the department will continue with its tax demand on the telecom major even as a process of international ar bit r at ion s ou g ht by the telecom company to resolve t he i ssue continues. W hile the basic tax demand was Rs 7,990 crore, the total outstanding is about Rs 2 0,0 0 0 crore after including penalty and interest. In an email, Voda fone said, “ T he notion of a retrospective withholding obligation is both unjust, and as noted in the Shome Report consti tutes `imposition of a burden of impossibility of performance'.“ The Indian tax department has charged Vodafone capital gains tax on its $11 billion purchase of Hutchison Whampoa's stake in what was then Hutchison Essar in 2007.
The 2012 amendment effectively overturned a Supreme Court judgment earlier that year that accepted the British company's argument that it wasn't liable to pay tax in India on the 2007 deal since it was between two companies based abroad. But the amendment with retroactive effect allowed local authorities to pursue the tax demand.
A local tax official said the department will continue with its tax demand on the telecom major even as a process of international ar bit r at ion s ou g ht by the telecom company to resolve t he i ssue continues. W hile the basic tax demand was Rs 7,990 crore, the total outstanding is about Rs 2 0,0 0 0 crore after including penalty and interest. In an email, Voda fone said, “ T he notion of a retrospective withholding obligation is both unjust, and as noted in the Shome Report consti tutes `imposition of a burden of impossibility of performance'.“ The Indian tax department has charged Vodafone capital gains tax on its $11 billion purchase of Hutchison Whampoa's stake in what was then Hutchison Essar in 2007.
The 2012 amendment effectively overturned a Supreme Court judgment earlier that year that accepted the British company's argument that it wasn't liable to pay tax in India on the 2007 deal since it was between two companies based abroad. But the amendment with retroactive effect allowed local authorities to pursue the tax demand.
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