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The dispute arose when the Indian government amended the Finance Act in 2012, where the power to retrospectively tax any gain on transfer of share was introduced. (Mint)
The dispute arose when the Indian government amended the Finance Act in 2012, where the power to retrospectively tax any gain on transfer of share was introduced. (Mint)

Govt seeks time in Vodafone case

  • The government on Tuesday sought more time from the Delhi high court to decide whether it will challenge the international arbitration court’s ruling in favour of Vodafone in the retrospective tax case

The government on Tuesday sought more time from the Delhi high court to decide whether it will challenge the international arbitration court’s ruling in favour of Vodafone Plc in the retrospective tax case. The matter has been adjourned to 8 December.

In September, Vodafone had won the long-pending arbitration case against India’s income tax (IT) department that demanded over 22,000 crore on a retrospective basis.

Additional solicitor general Chetan Sharma, representing the Centre, submitted before the Delhi high court that the empowered committee of the cabinet is yet to meet and take a decision on whether to challenge the award and sought two weeks’ time.

Senior advocate Harish Salve, appearing for Vodafone, said the telco will not pursue a second arbitration under the India-UK Bilateral Investment Promotion and Protection Agreement (Bipa) until the award published under the India-Netherlands Bipa is set aside.

The high court on Tuesday heard a case related to the validity of the second arbitration initiated by Vodafone under the India-UK Bipa for the same retrospective tax demand.

On 25 September, the Permanent Court of Arbitration in The Hague, the Netherlands, held that any attempt by India to enforce the tax demand on Vodafone would be a violation of the country’s international law obligations.

The international tribunal ruled that the Indian IT department’s tax demand from Vodafone is in breach of the bilateral investment treaty (BIT) between India and The Netherlands.

The dispute arose when the Indian government amended the Finance Act in 2012, where the power to retrospectively tax any gain on transfer of share was introduced. Following the amendment, Vodafone was asked to pay a total of 22,100 crore, in two tranches, in retrospective taxes on capital gains, including interest and penalty.

The amendment also overruled a Supreme Court judgement of 2012 that went in Vodafone's favour.

Vodafone then challenged India's amendment to the law, which allowed the country to retrospectively tax deals such as Vodafone Group's $10.9 billion acquisition of a 67% stake in Hutchison Essar in 2007.

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