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India is in talks with Vodafone Group Plc and Cairn Energy Plc to settle long-running tax disputes with them, a top government official told Bloomberg. It comes after Finance Minister Nirmala Sitharaman last week tabled a bill in the Lok Sabha to nullify the tax claims raised based on retrospective use of an anti-evasion tax law amendment introduced in 2012.

“There are some informal discussions going on," Revenue Secretary Tarun Bajaj said in an interview with Bloomberg Television’s Haslinda Amin on Monday. “I would not like to discuss them in public domain, but overall the answer to your question is, yes," he said when asked if the companies were willing to drop cases in international tribunals.

Dropping pending litigation or forgoing any interest or costs is the first step for companies to become eligible for exemption from the tax rule, which was introduced in 2012 and gave officials the power to go after M&A deals all the way back to 1962 if the underlying asset was in India. Besides opening room to settle disputes with Vodafone and Cairn, the move aims to support the economy’s recovery by attracting investment.

“We have not been influenced by arbitration matters which are going on in various courts," Bajaj said. “We want to give stability and certainty on taxation rates to foreign investors."

The retrospective taxation wasn’t the only challenge facing companies in India. Vodafone Idea Ltd., a joint venture between Vodafone Group and Indian billionaire Kumar Mangalam Birla’s conglomerate, faces billions of dollars in back fees to the government. The company suffered a setback recently when the nation’s top court rejected petitions by telecom operators to reassess their dues. The demand is casting a shadow on companies, with the survival of some being threatened.

“It would make no sense for government to come and say that we give this relief and companies say that it is not enough," said Bajaj. “ I am sure the government will find a solution."

“If the economy does well, revenues automatically do well. But it’s not something that I don’t want to give up revenues. If it helps the economy I am OK to give up revenues," Bajaj said.

Lok Sabha on Friday passed the Taxation Laws (Amendment) Bill, 2021, which will likely help settle disputes with Cairn Energy Plc, Vodafone Group Plc and 15 other companies over retrospective tax demands raised by the Union government.

Sitharaman pointed out that the 2012 Finance Act provision that amended the Income Tax Act to make offshore transactions involving Indian assets--including those executed prior to the change in law, taxable in India--was a “a matter of prolonged litigation."

(With inputs from Bloomberg)

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