In a major boost to telecom giant Vodafone, the company on Friday secured a ruling against the Indian government in an international arbitration tribunal with regard to over Rs 20,000 crore in tax dues.
The Hague-based international arbitration tribunal has ruled against the Indian government’s imposition of tax liability on Vodafone. It said the imposition is in breach of the investment treaty agreement between India and the Netherlands.
Following the development, the shares of Vodafone-Idea Ltd registered a jump of 12.09 per cent.
Origin of the tax dispute
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.
Sources told a news agency that the tribunal, in its ruling, said the government must cease seeking the dues from Vodafone. It also added that the Indian government should also pay over Rs 40 crore to the company as partial compensation for its legal costs, they added.
Vodafone and the finance ministry did not immediately respond to a request for comment.
Vodafone got SC relief in 2012
In 2012, India’s top court ruled in favour of the telecom provider but the government later that year changed the rules to enable it to tax deals that had already been concluded.
In April 2014, Vodafone initiated arbitration proceedings against India.
India is entangled in more than a dozen international arbitration cases against companies, including Cairn Energy, over retrospective tax claims and cancellation of contracts. The exchequer could end up paying thousands of crores in damages if it loses.
Relief from SC in AGR case
In a different case, the heavily indebted telecoms firm had won some reprieve earlier this month as the Supreme Court gave mobile carriers 10 years to settle thousands of crores in government dues.
India’s telecom providers have to pay the Department of Telecom nearly 3-5 per cent of their adjusted gross revenue (AGR) in usage charges for airwaves and 8 per cent of AGR as licence fees. They have long disputed the definition of AGR but last year the Supreme Court upheld the government’s view that the AGR should include all revenue.
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