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Vodafone responds to tax liability issue, asks claims to be clubbed together

Vodafone responds to tax liability issue, asks claims to be clubbed together

By Press Trust of India | Updated: 3 January 2014 12:40 IST

British telecom major Vodafone, which has submitted its response to an offer of non-binding conciliation to resolve a tax dispute, has suggested that all tax claims against the company be clubbed together for settlement.

Vodafone, according to sources, in its response to the Finance Ministry's offer for conciliation, had expressed keenness to settle the long-pending capital gains tax dispute.

The company suggested that a transfer pricing case before the Income Tax Appellate Tribunal (ITAT) should be clubbed with the Rs. 11,200 crores capital gains tax dispute, the sources said.

"Vodafone is likely to meet Finance Ministry officials this month. They have said they are keen on further conciliation talks," according to the sources.

The ITAT last week stayed a Rs. 3,700 crores tax claim by the Income Tax Department on Vodafone India in a transfer- pricing dispute and asked the company to deposit Rs. 200 crores as initial payment and submit bank guarantees for the remaining sum.

"Vodafone is pushing for early resolution of the transfer-pricing case. It also wants bundling of all tax cases against it for settlement," the sources added.

The Rs. 11,200 crores tax dispute relates to Vodafone's 2007 acquisition of Hutchison Whampoa's stake in Hutchison Essar.

The transfer-pricing case concerns Vodafone's issue of shares in its Pune-based BPO arm Vodafone India Services to Vodafone Teleservices Mauritius for Rs. 246.38 crores in FY08, which, according to the I-T department, was undervalued.

The Cabinet had approved a non-binding conciliation with the British telecom major in June last year. The outcome of the conciliation, however, will need to be ultimately vetted by Parliament as it would require an amendment to the I-T Act.

The government is also keen to settle the dispute even as the I-T Act can be amended only when the full budget is presented by the next government some time in mid-2014.

The conciliation has been proposed under the Indian arbitration law and not under the United Nations Commission on International Trade Law (UNCITRAL), as sought by Vodafone. No time frame has been set to conclude the proceedings.

The Supreme Court had ruled in Vodafone's favour in 2012, saying it was not liable to pay any tax over the acquisition of assets in India from Hong Kong-based Hutchison.

The government, later in 2012, changed the rules to enable it to make retrospective tax claims on concluded deals.

The Foreign Investment Promotion Board on December 30 cleared Vodafone's Rs. 10,141 crores plan to buy out minority shareholders in its India arm.

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