The issue is being watched closely after a new disappointment for the income tax department (TI) in the Cairn case. The government’s retrospective action – piloted by the IT department’s foreign tax division – has also been found in violation of its commitment to “fair and equitable treatment” under bilateral investment protection treaties.
For their part, Indian tax officials have argued that international court rulings cannot override the sovereign powers of the legislature in formulating tax policies.
He is pushing this argument to seek a review of the Vodafone ruling in Singapore, which points to a case involving an African country’s battle with global mining giants.
However, companies that have been affected by the retroactive tax have argued that they are not questioning the government or the powers of the legislature, but are seeking redress as India has not fulfilled its commitment under bilateral treaties.
The government has denounced the introduction of a retrospective tax amendment in 2012 by the previous congressional government as tax terrorism.
The tax dispute, which involves interest on penalties, began with Vodafone’s acquisition of Hutchison Whampoa’s Indian mobile assets in 2007. The government said Vodafone was required to pay taxes on the acquisition, which the company contested.
In September, the UK Vodafone Group won an international arbitration against the Rs 22,100 crore claim in tax.
(With inputs from agencies)
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