Vodafone serves notice against India on proposed tax amendment

NDTV, 17 Apr 2012 | 03:10 PM

http://profit.ndtv.com/News/Article/vodafone-serves-notice-against-india-on-proposed-tax-amendment-302153?pfrom=home-otherstories

British telecoms operator Vodafone Group said it had served the Indian government with a notice of dispute regarding India's proposal to retrospectively tax overseas transactions.

 Vodafone said in a statement on Tuesday that the 2012 finance bill proposals violated international legal protections granted to Vodafone and other foreign investors in India.

 "Vodafone has asked the Indian government to abandon or suitably to amend the retrospective aspects of the proposed legislation as Vodafone would prefer to reach an amicable solution to this matter," the company said.

 Vodafone has further threatened that it would take whatever steps were necessary to protect shareholder interests, including beginning treaty arbitration proceedings, if the government does not abandon the retrospective amendments.

 Finance Minister Pranab Mukherjee in his Union Budget this year proposed an amendment to the tax law that would change that. The modification, which will apply retrospectively from 1962, could allow the government to tax Vodafone hundreds of crore for its $11.5 bn (Rs 59,225 cr) purchase of Indian telecom operator Hutchison Essar in 2007.

 On 20 January 2012, the Supreme Court ruled in favour of Vodafone in a $2.5 bn (Rs 12,900 cr) tax dispute and said that Indian tax officials do not have jurisdiction over a deal between two global companies even if assets involved in that deal are located in India. The government had ordered Vodafone to pay taxes for its acquisition of 67 per cent stake in Hutch in 2007. India wanted Vodafone to pay capital gains taxes, which it believed Vodafone, as the buyer, was obliged to withhold.