Vodafone ready to settle Rs 20K-cr tax dispute in India

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British telecom major Vodafone has offered to go for conciliation with the Indian government to resolve the eight year old Rs 20,000 crore tax dispute. “Vodafone has in a written communication expressed its desire to go for conciliation for its tax disputes with India,” Revenue secretary Hasmuskh Adhia said in a tweet .

Adhia said the Government has held one preliminary meeting to explore terms of reference of the proposed conciliation on 10th October.

“We have not yet finalised contours of Terms of Reference. There would be more follow up meetings required,” he said. The Central Board of Direct Taxes also issued a statement late Wednesday reiterating Adhia’s tweets.

ET NOW had in a report earlier in the day said the government had offered to settle the case if the company agreed to pay the principal tax amount of Rs 7,998 crore out of the total demand of about Rs 20,000 crore, waiving the penalty and interest amount.

India tax authorities and Vodafone have been locked in a bitter tax dispute for latter’s 2007 takeover of Hutchison’s Essar’s telecom operations in a $11 billion deal. The company faces a demand of over Rs 20,000 crore, of which Rs 8,000 crore is the tax due and the remainder is interest and penalty.

The government held Vodafone responsible for not withholding tax from Hutchison on grounds that even though the transaction was conducted overseas, the underlying asset was in India and tax was therefore due to the Indian government.

India’s Supreme Court overturned the demand, prompting the government to amend the income tax law in 2012 to tax such indirect transfers with retrospective effect, a widely criticised law that has been blamed for damping investment sentiment.

Vodafone subsequently served arbitration notice to Indian government under India-Netherlands Bilateral investment Promotion Agreement but both sides decided to opt for conciliation. But, conciliation offer was withdrawn in May 2014 as talks did not make any headway.

The Narendra Modi-led government, which promised a stable and non-adversarial tax regime, did not reverse the retrospective amendment, which would have cancelled the tax demand on Vodafone, but put in place measures to ensure that the clause does not cause more damage.

Vodafone external affairs director guy Mathew kirk was in India to hold the first of these exploratory meetings.

A Vodafone spokesperson said : “Whilst I will not comment on specific enquiries, I will say – as a more general comment – that we have always made clear our openness to discussing the possibility of settlement, but that the content of any discussions we may have with the Indian Government remains confidential.”

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