Government open to out-of-court settlement with Vodafone and Cairn on tax cases

The government today said that it is open to out-of-court settlement with Vodafone and Cairn on tax cases, where the arbitration process has been initiated.

"As far as out of court settlement for Vodafone is concerned we have always said that we are prepared to discuss with friends and colleagues in Vodafone in good faith as to whether it might be possible to get to negotiated settlement we are always open to those discussions," Minister of State for Finance Jayant Sinha said.

Foreign investors like Vodafone have dragged government to arbitration over a Rs 20,000 crore tax dispute arising out of retrospective applicability of the tax law.

British oil explorer Cairn Energy plc has also initiated a similar move over Rs 10,247 crore tax liability due to the same reason.

The basic tax demand for Vodafone was Rs 7,990 crore but the total outstanding, including interest and penalty, is estimated to have risen to Rs 20,000 crore.

While both the central government and Vodafone have named their arbitrators, they have not yet been able to agree on a third arbitrator to preside over the proceedings.

The case relates to the retrospective amendment of the I-T laws carried out by the UPA government in 2012 to overturn the Supreme Court verdict, which had favoured Vodafone.

Cairn had in April named former Bulgarian minister and lawyer Stanimir A Alexandrov as its arbitrator in the matter. India on its part has said it would soon appoint an arbitrator in the tax dispute.

Asked if the government is considering out-of-court settlement for Vodafone, CBDT Chairperson Anita Kapur told PTI, the government is always in the favour of reducing litigation.

"We will have to wait for some developments. The government is always open to reduce litigation dispute by whatever ways it is possible."
Sinha also said that the most comprehensive efforts to reduce litigation is by elimination of exemptions and reducing corporate tax rates.

"The other thing that we have underway is simplification of the tax code...so whether it is through cleaning up or streamlining exemptions, whether it is simplifying the tax code, we are absolutely trying to reduce the amount of litigation that is in the system right now," he said.

"Our goal is to ensure that our tax system is fair, it's simple, it's predictable... Our endeavor with respect to all these specific cases is that we always we will attempt in all good faith to try and settle them. That remains our consistent principle for these specific cases," he added.

Image credit: Indiatimes