The Finance Ministry said on Friday that it will consult its legal advisers on the tax dispute with Vodafone International Holding BV to decide the next course of action after an international arbitration tribunal delivered its verdict.
News agency Reuters reported on Friday that Vodafone Group Plc had won an international arbitration case against the Indian government in the high-profile dispute involving a $ 2 billion tax claim.
The ministry said it has just been informed that the award has been made in the arbitration case invoked by the company and that it will study all aspects of it carefully in consultation with its lawyers. “After such consultations, the government will consider all options and make a decision on the further course of action, including legal remedies before appropriate,” the statement said.
A person familiar with the matter said a quick look at the award in the arbitration case makes it clear that no damages have been awarded against the Indian government. The person said that the government of India has been asked to pay only 4.3 million pounds, that is, around Rs. Rs 40 million, which is 60% of the court’s administrative cost, while the remaining 40% of the cost would be borne by Vodafone.
“Also, the Government of India may have to refund the collected tax, which is approximately Rs. 45 million rupees, only if no appeal is filed against the award. Therefore, the total expense would be around Rs. 85 million rupees only, “said the person, who spoke on condition of anonymity.
However, a decision on the government’s response could hinge on strategic and economic considerations about the investment climate at a time when the government is taking steps to improve the ease of doing business and boost investments.
The case concerns India’s controversial retrospective amendment to the Income Tax Act in 2012. In January 2012, the Supreme Court ruled that Vodafone Group Plc’s $ 11 billion offshore deal to acquire Hutchison Essar Ltd ., later renamed Vodafone India Ltd., was not taxed in India. In the Finance Act of that year, the government sought to amend the law to clarify that such arrangements have always been taxed in India, even if they are executed abroad. The tax dispute eventually went to international arbitration.
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