Cabinet to decide on Vodafone issue

To quell criticism on tax matters relating to multinational companies, the Government said it was seeking advice from the Cabinet on the Vodafone issue. On the Shell matter, it said it had approached the top legal adviser to the Government, the Attorney-General.

Finance Minister P. Chidambaram’s assurance to foreign investors came on Wednesday when he said that the Government was approaching all these cases in a professional manner. His announcement, basically in relation to the British telecom giant Vodafone, came on the day British Prime Minister David Cameron ended his three-day official visit to India.

The Revenue Department and Vodafone are yet to reach a truce in the long-running tax dispute of over Rs 11,000 crore.

Talking to newspersons, Chidambaram said, “As far as Vodafone is concerned, they had written to us proposing conciliation. We have written back saying that the request will be considered by the competent authority. So, the matter will go to the Cabinet.”

The Cabinet is likely to authorise Chidambaram to finalise a settlement mechanism.

Even after the Supreme Court’s verdict in favour of Vodafone in January last year, the Government brought in a retrospective amendment in the Income-Tax Act to undo this decision. The Revenue Department also sent a reminder to Vodafone, but the telecom company maintained that it had no tax liability. The company has also threatened to approach the arbitration panel.

Shell case

As regards Dutch oil major Shell, Chidambaram said, “So far as Shell is concerned, and a number of cases similar to that, there are orders that have been passed…The scope and interpretation of Chapter 10 to a case of this nature, where shares have been allotted by a subsidiary to the parent company, has been referred to the Attorney-General a few days ago, and we are awaiting the advisory of the AG.”

On February 4, in a statement, Shell India had termed the recent order by the Income-Tax Department, claiming tax liabilities involving transfer of shares, as an inaccurate demand. The company had said that it would challenge the order and was in the process of evaluating all options for redress since it sullied Shell’s ‘good name’.

The Royal Dutch Shell group has, over the last few years, made significant investments in India. An equity injection was used to finance these investments and to fund its ordinary business activities.

(This article was published on February 20, 2013)
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