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Business News/ Companies / News/  Vodafone, Cairn Energy have 7 months to accept govt’s olive branch in tax disputes
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Vodafone, Cairn Energy have 7 months to accept govt’s olive branch in tax disputes

Neither Vodafone nor Cairn has been very enthusiastic about the tax dispute resolution scheme; both maintain their stance that they are not liable to pay tax in India

The tax department and Vodafone have been locked in a dispute since 2007 over the telecom company’s $11 billion acquisition of Hutchison Essar, now known as Vodafone India. Photo: ReutersPremium
The tax department and Vodafone have been locked in a dispute since 2007 over the telecom company’s $11 billion acquisition of Hutchison Essar, now known as Vodafone India. Photo: Reuters

New Delhi: Vodafone Plc, Cairn Energy Plc and other companies battling the tax department over retrospective taxation of capital gains have to accept the government’s olive branch by December end.

The income tax department notified that the dispute resolution scheme announced in this year’s budget will come into effect from 1 June and will be open for seven months.

“The Direct Tax Dispute Resolution Scheme, 2016 incorporated as Chapter X of the Finance Act, 2016, shall come into force on the 1st of June, 2016 and Declarations under this Scheme may be made on or before the 31st December, 2016 in respect of tax arrears & specified tax," the tax department said in a press release.

In this year’s budget, finance minister Arun Jaitley announced the one-time dispute resolution scheme.

As per the contours of the scheme, companies embroiled in tax disputes will be able to pay tax arrears and get a waiver of interest and penalty provided they withdraw all appeals against the government in all judicial forums, including international arbitration proceedings invoked under bilateral investment protection agreements.

Neither Vodafone Plc nor Cairn Energy Plc has been very enthusiastic about the scheme; both maintain their stance that they are not liable to pay tax in India.

Mint has reached out to both companies and will update this story once they respond.

The tax department and Vodafone have been locked in a dispute since 2007 over the telecom company’s $11 billion acquisition of Hutchison Essar Ltd, now known as Vodafone India Ltd. The tax demand, which was initially around 8,000 crore, has now more than doubled to 20,000 crore with interest and penalty.

Though the Supreme Court ruled in favour of Vodafone in the tax case, the government of the day in 2012 brought in a retrospective amendment to tax laws, bringing such transactions under the tax net. This prompted Vodafone to launch international arbitration proceedings.

The Cairn tax demand is on account of the alleged capital gains arising from a 2007 deal in the hands of Cairn UK Holdings, the erstwhile parent of Cairn India. That was the year Cairn Energy restructured its Indian subsidiaries ahead of an initial public offering. Cairn India, too, has been served a tax notice, a dispute over which is pending in the Delhi high court.

The 28,000-crore tax demand comprises 10,247 crore of principal tax and the remaining amount as interest. Cairn Energy has also initiated international arbitration under the India-UK bilateral investment protection agreement.

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Published: 31 May 2016, 12:08 PM IST
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