Tax issue: No relief for Vodafone

Telecom Lead India: An inter-ministerial panel set up to
prepare response to arbitration notice served by the British telecom major
Vodafone has decided against promising any relief to the company from the
controversial retrospective amendments in the income tax law.

“We deliberated on the company’s demand for an undertaking from the
government that it shall be exempted from the retrospective amendment. We did
not agree with Vodafone,” said a government official privy to the

The prime minister’s office will now take a final call on the response to the
arbitration notice served by Vodafone under the India-Netherlands Bilateral
Investment Promotion Agreement (BIPA), according to a report in Economic Times.

“The reply will be sent to the Prime Minister’s Office first and after
approval it will be sent to Vodafone,” the official said.

Finance secretary RS Gujral headed IMG has officials from the ministries of
external affairs, telecom, law and revenue as its members. Prime Minister
Manmohan Singh now handles the finance portfolio.

The government has already replied to the initial notice arguing that tax
matters are not covered under the India-Netherlands BIPA. British telecom major
had sent the rejoinder seeking an assurance that the retrospective tax
amendments would not apply to its acquisition of Hutchinson’s stake in
Hutch-Essar in 2007.

The retrospective change in the finance Act, 2012 makes all overseas indirect
transfers with an underlying Indian asset taxable in India. The amendment in
the income tax act neutralises the Supreme Court decision that held that
Vodafone did not have a tax liability in India and could lead to a tax demand
of Rs 20,300 crore tax including penalty and interest on the company.

The telecom major had acquired Hutchison Essar for $ 11.2 billion in 2007.


Vodafone tax: Hutchison buy to cost Rs 20,000 crore more for UK
telecom giant


Vodafone Plc of the U.K. is facing Rs 20,000 crore tax
demand in India following the controversial tax issue. This will be a big blow
to the financials of Vodafone which are keen to strengthen its presence in
India, one of the emerging markets for the UK mobile giant. It is interesting
to note that the mobile firm never decreased its focus on Indian telecom market
despite all controversies. Vodafone is one of the top telecom companies in
India based on Capex in telecom infrastructure.


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