The Income Tax Department will take “appropriate action” with regard to a tax demand of Rs 11,218 crore from British telecom major Vodafone. This has been informed by the Finance Ministry to the Rajya Sabha.

Minister of State for Finance S.S. Palanimanickam said in a written reply, “The Assessing Officer, as a quasi judicial authority, will take appropriate action in the light of the Supreme Court judgment and Section 119 of the Finance Act, 2012.”

The Income-Tax Department on October 22, 2010 passed an order determining a tax liability (including interest) of Rs 11,218 crore on Vodafone on acquisition of Hutchison’s stake in Hutch-Essar through a deal in Cayman Islands in 2007.

The Supreme Court, however, quashed the order in January this year. After this the Income-Tax Act was amended with retrospective effect to bring into tax net such deals. Section 119 of the Finance Act, 2012 seeks to validate the October 2010 order of the Income-Tax Department.

The Department had also passed an order to impose a penalty of Rs 7,900 crore in April 2011. However, the penalty was not enforced in view of a Supreme Court’s direction dated April 15, 2011, Palanimanickam said.

The Government had earlier formed an Inter-Ministerial Group (IMG) to look into the arbitration notice send by the telecom major under the India-Netherlands bilateral investment protection agreement (BIPA)

Shishir.sinha@thehindu.co.in

(This article was published on August 9, 2012)
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