Vodafone files application with government for settlement of retro tax dispute

British telecom giant Vodafone on Friday said it has filed an application with Indian authorities for settlement of their retrospective tax dispute.

Vodafone further said it has "always been confident" that no tax is due on the company.

The government in August enacted a law to end all retrospective taxation imposed on indirect transfer of Indian assets. The rules under the law seek to withdraw tax demands made using a 2012 retrospective legislation to tax the indirect transfer of Indian assets and also refund the amount paid in these cases without any interest.

Asked if the company has filed an application with the Indian government to settle the retrospective tax dispute, a Vodafone spokesperson said, "We can confirm we have filed an application".

The spokesperson added, "We have always been confident that no tax liability arose in respect of our acquisition of the Indian business, and this was borne out by the decisions of the Supreme Court of India and the International Court of Arbitration.

On October 13, the finance ministry notified a fresh set of rules to facilitate settlement of the retrospective tax dispute with British telecom giant Vodafone Plc.

The 'Relaxation of Validation (Section 119 of the Finance Act, 2012) Rules, 2021', prescribed the forms and conditions for the declaration to be filed by the company for settling its case. Vodafone had 45 days to approach the government for a settlement — a timeline that ended in November.

Taxes were sought from the company by validating an October 2010 order of the I-T department that demanded Rs 11,218 crore in taxes from the British firm over its 2007 acquisition of Hutch-Essar through a deal in the Cayman Islands.

The Supreme Court had in January 2012 quashed the tax demand but the same was sought to be revalidated through Section 119 in the Finance Act, 2012. A penalty of Rs 7,900 crore was also imposed on Vodafone.

With this, as many as 15 companies against whom retrospective tax demands were raised have approached the government to settle cases.

The Taxation Laws (Amendment) Bill, 2021, enacted in August, scraps the tax rule that gave the tax department power to go 50 years back and slap capital gains levies wherever ownership had changed hands overseas but business assets were in India.

The 2012 legislation was used to levy a cumulative of Rs 1.10 lakh crore of tax on 17 entities, including UK telecom giant Vodafone.

Last month, Cairn Energy Plc too approached the government to settle retro tax cases and gave required undertakings indemnifying the Indian government against future claims as well as agreeing to drop any legal proceedings anywhere in the world.

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