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New Delhi: A day after finance minister P Chidambaram said reconciliation talks with Vodafone Group plc to resolve a sticky tax dispute failed on account of the telco’s “indecisiveness", the company has hit back and said that its suggestion on adopting “international conciliation mechanisms" were “rejected by the Indian government."

In a statement released on Wednesday evening, it added that it had always “responded to the government’s queries in a timely manner, notwithstanding, at one point, a six month delay by the Indian government in responding to correspondence sent by Vodafone."

The dispute relates to Vodafone’s acquisition of Hutchison Essar from the Hutchison Whampoa Group, and the tax that the government said Vodafone should have withheld from the amount it paid Hutchison.

The Supreme Court ruled against this tax demand but the government subsequently introduced a retrospective law that allowed it to tax such transactions.

The talks also failed, Vodafone said, because the Indian government independently “in a transfer pricing claim, to tax an alleged transfer of call options held by a company now called Vodafone India Services Pte Ltd (“VISPL")." The telco maintains that the options were held both before and after the Hutchison Essar sale by the same company."

The company’s statement would seem to suggest that a protracted legal battle is in the offing. With elections due in April and May, the government is unlikely to want to settle – something that can make it vulnerable to criticism from the opposition.

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