Vodafone had approached the Singapore International Arbitration Center in 2016 on the dispute
New Delhi:
Telecommunications giant Vodafone won a significant ruling against the Indian government in an international court on Friday for more than Rs 20 billion in quotas that it described as unfair.
The international arbitration court in The Hague ruled that the Indian government’s imposition of a tax liability on Vodafone violates the investment treaty agreement between India and the Netherlands, sources told Reuters news agency.
The court, in its ruling, said that the government should stop seeking Vodafone fees and should also pay more than Rs 40 million to the company as partial compensation for its legal costs, the source said.
Vodafone and India’s Finance Ministry did not immediately respond to a request for comment.
The tax dispute involving Rs 12,000 crore in interest and Rs 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, what the company contested.
In 2012, India’s high court ruled in favor of the telecom provider, but the government later that year changed the rules to allow it to tax deals that had already been concluded.
In April 2014, Vodafone initiated arbitration proceedings against India.
India is involved in more than a dozen international arbitration cases against companies, including Cairn Energy, for retrospective tax claims and cancellation of contracts. The treasury could end up paying billions of dollars in damages if it loses.
In a different case, the heavily indebted telecoms firm had gotten a break earlier this month, as the Supreme Court gave mobile operators 10 years to settle billions of rupees in government fees.
Telecommunications providers in India have to pay the Department of Telecommunications about 3 to 5 percent of their adjusted gross income (AGR) in radio wave usage charges and 8 percent of AGR as license fees. They have long disputed the definition of AGR, but last year the Supreme Court upheld the government’s view that AGR should include all revenue.
(With input from Reuters)
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