Vodafone wins arbitration against India in retrospective tax case

Conduct of Indian tax dept is in breach of ‘fair and equitable’ treatment: Court


In a huge breather for cash-strapped Vodafone India, its parent company Vodafone has won the case against India over a retrospective tax demand of Rs 20,000 crore at the Permanent Court of Arbitration in Hague on Friday. According to a CNBC report, the Hague Court in its ruling said that the conduct of the Indian tax department is in breach of "fair and equitable" treatment.

The British telecom major had moved the International Court of Justice (ICJ) in 2016 due to a lack of consensus between the parties' arbitrators in finalising a judge for the tax dispute. Vodafone is facing tax claims and interest totalling more than Rs 20,000 crore in India, including Rs 14,200 crore for acquiring Hutchison's stake in 2007.

A tax demand of Rs 11,000 crore was raised by the then government related to Vodafone’s $11-billion acquisition of Hutchison Telecom stake in 2009.

The government had said then that the Hutchison-Vodafone deal was liable for tax deduction at source (TDS) under the Income Tax (IT) Act, and since Vodafone had not deducted the tax at source, the government raised the demand, which has expanded to Rs 20,000 crore, including interest and penalties.

While the Supreme Court subsequently quashed the demand on January 20, 2012, the government amended its law retrospectively, putting the liability back on Vodafone Group.

On February 12, 2016, the telecom company received a notice "of an outstanding tax demand of Rs 22,100 crore (which included interest accruing since the date of the original demand)" along with a threat to confiscate Indian assets if the tax is not paid.

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