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Vodafone wins retro tax struggle towards India; govt estimates Rs 75 cr legal responsibility | Firms Information

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New Delhi: British telecom large Vodafone Group plc on Friday received an arbitration towards the Indian authorities over a requirement for Rs 22,100 crore in taxes utilizing retrospective laws. A global arbitration tribunal dominated that India’s demand in previous taxes have been in breach of truthful remedy underneath a bilateral funding safety pact.

“The award is confidential however Vodafone can verify that the tribunal has discovered (it) in Vodafone’s favour,” Vodafone Group mentioned in a press release. “We’re finding out the prolonged paperwork and may make no additional remark presently.” It was not instantly recognized if the Indian authorities will abide by the arbitration award.

The Authorities of India’s legal responsibility can be restricted to about Rs 75 crore — Rs 30 crore in price and one other Rs 45 crore in tax refund, sources with direct information of the matter mentioned. Vodafone had earlier than the arbitration tribunal challenged India’s utilization of a 2012 laws that gave it powers to retrospectively tax offers like Vodafone’s USD 11 billion acquisition of 67 per cent stake within the cell phone enterprise owned by Hutchison Whampoa in 2007.

It challenged the demand of Rs 7,990 crore in capital features taxes (Rs 22,100 crore after together with curiosity and penalty) underneath the Netherlands-India Bilateral Funding Treaty (BIT). Sources mentioned the tax demand was on the UK-listed firm and Vodafone’s India enterprise confronted no legal responsibility.

Vodafone merged its India operations with billionaire Kumar Mangalam Birla’s conglomerate however the mixed entity Vodafone Concept Ltd is dealing with a USD 7.eight billion invoice in previous statutory dues. Tax authorities had in September 2007 served discover to Vodafone Worldwide Holdings BV (VIHBV) for its alleged failure to deduct withholding tax from consideration paid to the Hutchison Telecommunications Worldwide Ltd.

Vodafone challenged this within the Supreme Courtroom, which in January 2012 set it apart, saying the transaction was not taxable in India and so the corporate had no obligation to withhold tax. In Might that yr, Parliament handed the Finance Act 2012 that amended numerous provisions of the Revenue Tax Act 1961 with retrospective impact to tax any acquire on switch of shares in a non-Indian firm which derives substantial worth from underlying Indian property.

The corporate was in January 2013 served a tax discover of Rs 14,200 crore after together with curiosity on the principal quantity. A yr later, Vodafone challenged the tax demand underneath the Dutch BIT. Sources mentioned the corporate in April 2014 served the discover of arbitration after out-of-court dispute decision talks failed.

The tax division in February 2016 served a requirement discover of Rs 22,100 crore, together with curiosity accruing because the date of the unique demand. Vodafone has at all times maintained that there isn’t any legal responsibility and that it’s going to “proceed to defend vigorously any allegation that VIHBV or Vodafone India Ltd is liable to pay tax in reference to the transaction with Hutchison and can proceed to train all rights to hunt redress”.

Apart from Vodafone, the Indian authorities additionally used the retrospective tax laws to hunt Rs 10,247 crore from British oil explorer Cairn Vitality Plc over a 2006 reorganisation of its Indian companies.



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