India has challenged in Singapore an international arbitration tribunal’s verdict against it in a $ 2 billion tax lawsuit involving Vodafone Group Plc, a senior government official told Reuters on Thursday on condition of anonymity.
British telecoms giant Vodafone Group plc won arbitration against the Indian government in September this year over a claim for Rs 22.1 billion in taxes using retrospective legislation. An international arbitration tribunal ruled that India’s claim for past taxes violated fair treatment under a bilateral investment protection pact.
The Center had then said that it would study the arbitration award and decide on its future course of action.
The tax dispute, involving interest of ₹ 12,000 crore and ₹ 7,900 crore in penalties, stems from 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 2007, the tax authorities notified Vodafone International Holdings BV (HIVBV) of its alleged failure to deduct withholding tax from the consideration paid to Hutchison Telecommunications International Ltd. Vodafone challenged this in the Supreme Court, which in January 2012 canceled it. stating that the transaction was not taxable in India and therefore the company was not required to withhold tax.
In May of that year, Parliament passed the Finance Act of 2012 which amended various provisions of the Income Tax Act of 1961 with retroactive effect to tax any gain on the transfer of shares in a non-Indian company that achieves a value substantial portion of the underlying Indian assets.
In January 2013, the company delivered a tax notice of Rs 14,200 crore after including interest on the principal amount. A year later, Vodafone challenged the tax claim under the Dutch BIT. Sources said that the company in April 2014 delivered the arbitration notice after the out-of-court dispute resolution talks failed.
In February 2016, the tax department sent a notice of claim for Rs 22.1 billion, including interest accrued from the date of the original claim. Vodafone has always maintained that there is no liability and that it will “continue to vigorously defend any allegation that HIVBV or Vodafone India Ltd are subject to tax in connection with the transaction with Hutchison and will continue to exercise all rights to seek redress.”
In addition to Vodafone, the Indian government also used retrospective tax law to seek Rs 10,247 crore from British oil explorer Cairn Energy Plc during a 2006 reorganization of its Indian businesses.
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