Entangled in a ₹20,000-crore tax dispute, telecom major Vodafone served a notice for arbitration without waiting for the decision of the Income Tax Appellate Tribunal (ITAT), the Finance Ministry has clarified.
On Monday, the Ministry clarified its factual position on the Vodafone issue to quell speculation. It said the Revenue Department, on March 11, had urged Vodafone to engage seriously in the proceedings before ITAT. The department also wanted the company to ensure that no avoidable delay was caused and assured it that efforts would be made for early hearing on the appeal.
“It was stated that thereafter the matter regarding conciliation would be reviewed,” the Ministry said.
This development took place after the Cabinet, on February 28, deferred considering a proposal to withdraw from the conciliation talks with Vodafone and advised that efforts be made towards expeditious adjudication of the transfer pricing dispute with Vodafone India Services Private Ltd in the ITAT.
However, Vodafone, in its letter dated March 13, stated they saw no merit in reviewing the matter of conciliation on receipt of the decision of ITAT. It said the only body capable of resolving the issue would be an arbitration panel constituted according to the Bilateral Investment Promotion and Protection Agreement.
Finally, the company served an arbitration notice dated April 17 under the BIPA between India and the Netherlands.
After this, the Government decided to go back to the Cabinet to withdraw the conciliation. It may be noted that the Cabinet had, in June 2013, approved a Finance Ministry proposal to go in for conciliation with Vodafone to resolve the capital gains tax dispute related to its acquisition of Hutchison Whampoa’s stake in Hutchison Essar in 2007.
While the basic tax demand for the 2007 acquisition is ₹7,990 crore, the outstanding dues, including a penalty of a similar amount and accrued interest, run into ₹20,000 crore.