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Vodafone tax dispute: India appeals against international arbitration tribunal’s verdict

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The Indian government has challenged an international arbitration tribunal’s earlier verdict in favour of Vodafone Plc in a retrospective tax dispute case in a Singapore court. The fresh appeal has been filed by India on December 21.

The Indian government’s appeal comes after Vodafone won a long-pending arbitration case against India’s income tax department, which had demanded over Rs 22,000 crore from the telecom giant as retrospective tax.

An international arbitration tribunal (Permanent Court of Arbitration) in The Hague, Netherlands had in September ruled that India’s imposition of tax liability on Vodafone was a breach of an investment treaty agreement between India and the Netherlands. India was given 90 days or three months to appeal against the ruling.

Acquisition of Hutchison Whampoa

The tax dispute involving Rs 12,000 crore in interest and Rs 7,900 crore in penalties stems from Vodafone’s acquisition of the Indian mobile assets from Hutchison Whampoa in 2007. The government said Vodafone was liable to pay taxes on the acquisition, which the company contested.

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The dispute first emerged when the Indian government amended the Finance Act in 2012, under which authorities were given the power to retrospectively tax any gain on the transfer of the share.

Due to the amendment, Vodafone was asked to pay a total of Rs 22,100 crore in two tranches towards retrospective taxes on capital gains, including interest and penalty. It may be noted that the amendment also overruled a Supreme Court judgment of 2012 that went in favour of Vodafone.

Cairn tax dispute

The development comes a day after India lost another international arbitration case this week against Cairn Energy Plc over a retrospective tax dispute case. India has been asked to pay Rs 8,000 crore in damages to the UK-listed company.

However, it now seems that India will challenge the Cairn ruling as well, given the massive amount it has been asked to pay in damages.

 

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