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The government today said that it is open to out-of-court settlement with <keyword id="15492" type="CITY" weightage="80" keywordseo="Vodafone">Vodafone</keyword> 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 <keyword id="6357677" type="PERSON" weightage="80" keywordseo="Jayant-Sinha">Jayant Sinha</keyword> 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 <keyword id="128650" type="COMPANY" weightage="80" keywordseo="Cairn-Energy">Cairn Energy</keyword> 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 <keyword id="2573203" type="PERSON" weightage="80" keywordseo="Anita-Kapur">Anita Kapur</keyword> 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

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

Attorney General Mukul Rohatgi has asked the <keyword id="6354751" type="COMPANY" weightage="100" keywordseo="Income-Tax">Income Tax</keyword> Department not to appeal against the Bombay High Court judgment in favour of <keyword id="15492" type="CITY" weightage="100" keywordseo="Vodafone">Vodafone</keyword> in a tax dispute. 
 Rohtagi had said, “The judgment of the high court is absolutely correct and we should accept the judgment and every matter need not be challenged to the <keyword id="6354977" type="ORGANIZATION" weightage="60" keywordseo="Supreme-Court">Supreme Court</keyword>. I have also concurred with the views of the chairperson of the Central Board of Direct Taxes.” 
 
The Income Tax Department had asked for the attorney general’s opinion on whether it should appeal against verdict in the Supreme Court. The final decision in this regard will be taken by the government. Such a move is likely to improve foreign investors’ sentiment. 
 
Vodafone has been facing a number of tax disputes in India since entering the country seven years ago. In another case, Vodafone is fighting a legal battle over a tax demand of about $2 billion regarding its acquisition of Hutchison in 2007.

Attorney General Asks Income Tax Dept To Not Appeal Against Vodafone Tax Ruling

<ul class="p-rich_text_list p-rich_text_list__bullet"><li>India has decided to do away with a 2012 law that allowed the government to tax profits from earlier years even though theywere not taxable at the time.</li><li>This brings to end a decade-long tussle with foreign companies that saw the law as a deterrent to investments in India.</li><li>Finance Minister Nirmala Sitharaman introduced 'The Taxation Laws (Amendment) Bill, 2021' which will undo the damage from the 2012 law.</li><li>The bill also proposes to refund the amount paid so far, in these cases, without any interest thereon.</li></ul>In a bid to bury the ghost of retrospective taxation, the government on Thursday brought a bill in the Lok Sabha to withdraw all back tax demands on companies such as Cairn Energy and Vodafone and said it will refund the money collected to enforce such levies. Finance Minister Nirmala Sitharaman introduced 'The Taxation Laws (Amendment) Bill, 2021' in the Lok Sabha that seeks to withdraw tax demands made using a 2012 retrospective legislation to tax the indirect transfer of Indian assets. The bill provides for the withdrawal of tax demand made on "indirect transfer of Indian assets if the transaction was undertaken before May 28, 2012 (i.e. the day the <keyword id="996979" type="PERSON" weightage="20" keywordseo="retrospective-tax">retrospective tax</keyword> legislation came into being)." "It is also proposed to refund the amount paid in these cases without any interest thereon," it said. The bill has a direct bearing on long-running tax disputes with British firms Cairn Energy Plc and Vodafone Group. The Indian government has lost two separate arbitrations brought by the two companies against the levy of retrospective taxes. While the government has virtually no liability in the Vodafone case, it has to refund USD 1.2 billion to Cairn Energy for the shares of the company it had sold, tax refund withheld and dividends confiscated. The bill states that the issue of taxability of gains arising from the transfer of assets located in India through the transfer of shares of a foreign company (indirect transfer of Indian assets) was a subject matter of protracted litigation. The Supreme Court in 2012 had given a verdict that gains arising from indirect transfer of Indian assets are not taxable under the extant provisions of the Act. But to circumvent this, the provisions of the Income Tax Act, 1961 were amended by the Finance Act, 2012 with retrospective effect, to clarify that gains arising from the sale of shares of a foreign company is taxable in India if such shares, directly or indirectly, derive their value substantially from assets located in India. "Pursuant thereto, income-tax demand had been raised in 17 cases. In two cases assessments are pending due to stay granted by High Court," the objects of the Bill said. Out of the 17 cases, arbitration under Bilateral Investment Protection Treaty with the United Kingdom and the Netherlands had been invoked in four cases. "In two cases, the Arbitration Tribunal ruled in favour of the taxpayer and against the Income Tax Department," it said in a reference to arbitration awards won by Cairn and Vodafone. "The said clarificatory amendments made by the Finance Act, 2012 invited criticism from stakeholders mainly with respect to the retrospective effect given to the amendments. It is argued that such retrospective amendments militate against the principle of tax certainty and damage India's reputation as an attractive destination," it said. While the government has in the past few years brought major reforms in the financial and infrastructure sector to create a positive environment for investment in the country, "the retrospective clarificatory amendment and consequent demand created in a few cases continue to be a sore point with potential investors," it said. The country today stands at a juncture when quick recovery of the economy after the COVID-19 pandemic is the need of the hour and foreign investment has an important role to play in promoting faster economic growth and employment. "The Bill proposes to amend the Income-tax Act, 1961 so as to provide that no tax demand shall be raised in future on the basis of the said retrospective amendment for any indirect transfer of Indian assets if the transaction was undertaken before 28th May 2012 (i.e., the date on which the Finance Bill, 2012 received the assent of the President)," it said. It further proposed to provide that the demand raised for indirect transfer of Indian assets made before May 28, 2012 shall be nullified on fulfilment of specified conditions such as withdrawal or furnishing of undertaking for withdrawal of pending litigation and furnishing of an undertaking to the effect that no claim for cost, damages, interest, etc shall be filed. It also proposed to "refund the amount paid in these cases without any interest thereon," it said. The bill proposes to amend the Finance Act, 2012 so as to provide that the validation of demand under section 119 of the Finance Act, 2012 shall cease to apply on fulfilment of specified conditions such as withdrawal of pending litigation and furnishing of an undertaking that no claim for cost, damages, interest, etc shall be filed. SEE ALSO <a href="https://www.businessinsider.in/tech/news/google-is-now-using-chrome-as-another-security-layer-for-account-sign-ins/articleshow/84975356.cms">Google is now using Chrome as an added security layer for account sign-ins</a> <a href="https://www.businessinsider.in/stock-market/news/how-to-check-allotment-status-of-glenmark-life-sciences-ipo/articleshow/84978486.cms">Glenmark Life Sciences IPO: How to check allotment status, listing date and more</a>

Indian government brings in a bill to bury the infamous retrospective tax that haunted Cairn and Vodafone for nearly a decade

The <keyword id="15492" type="CITY" weightage="60" keywordseo="Vodafone">Vodafone</keyword> tax issue, having triggered a lot of turbulence among the corporate, has been hinted by the <keyword id="46149" type="POSITION" weightage="60" keywordseo="Telecom-minister">Telecom Minister</keyword> <keyword id="6354886" type="PERSON" weightage="60" keywordseo="Ravi-Shankar-Prasad">Ravi Shankar Prasad</keyword> as the case with alternative options to solve. 
 
 In a Press Trust of India (PTI) report, the minister was quoted saying, "I know taxing is a problem. Let me make an observation on this, taxing scenario of India should not begin with and end with Vodafone (tax case), I know that Vodafone issue could had been handled differently.” 
 Vodafone has been imposed a tax liability of over Rs 11,200 crore, along with interest, on its 2007 acquisition of Hong Kong-based <keyword id="127031" type="COMPANY" weightage="60" keywordseo="Hutchison-Whampoa">Hutchison Whampoa</keyword>'s stake in India's telecom major, Hutchison Essar. 
 PTI has further quoted Prasad who said, “On a second tax dispute involving Vodafone, the government has decided not to appeal in a higher court after the telecom firm won the case in <keyword id="48485" type="ORGANIZATION" weightage="60" keywordseo="Bombay-high-court">Bombay High Court</keyword>.” 
 
 The Vodafone case involves a tax liability of Rs 3,200 crore , which the Supreme Court said private companies cannot use ‘corporate veil’ to avoid taxations. 
 
 "We are very clear that the taxing regime has to be stable and predictable but those who do businesses also need to understand they are obliged to pay tax," Prasad said clearing the confusion of government backing the corporate. 
 
(Image: Reuters) 
 
 Prasad has made it clear that whole debate on taxing scenario should not revolve around just Vodafone and therefore this kind of a campaign that Vodafone case is the end, is not right.

Vodafone case isn’t the end, clarifies Telecom Minister

<keyword id="15492" type="CITY" weightage="100" keywordseo="Vodafone">Vodafone</keyword> India is facing <keyword id="45031" type="PERSON" weightage="100" keywordseo="Tax">tax</keyword> liability and interest amounting to more than Rs 27,000 crore, the company said in its annual report. Vodafone said its Indian subsidiary had received a letter in January 2013, reminding it of the tax demand of Rs 14,200 crore regarding the dispute over acquisition of Hutchinson in 2007. 
 
The company faces tax demand following the retrospective tax amendment brought about in 2012. 
 The report said, “Vodafone International Holdings BV (VIHBV) has not received any formal demand for taxation following the <keyword id="6374292" type="UNKNOWN" weightage="100" keywordseo="Finance-Act">Finance Act</keyword>, 2012, but it did receive a letter on January 3, 2013, reminding it of the tax demand raised prior to the Indian Supreme Court’s judgment and purporting to update the interest element of that demand in a total amount of Rs 142 billion.” 
 
Besides, the UK-based telecom company is also facing tax liability of more than £1billion. These claims pertain to transfer pricing and value-added tax. 
 
According to the report, “Vodafone India (VIL) and Vodafone India Services Pvt Ltd (VISPL) are involved in a number of tax cases with total claims exceeding £1 billion plus interest and penalties of up to 300% of the principal.” 
 
At current rate, £1 billion is worth Rs 9,900 crore. 
 
The Supreme Court had ruled in favour of Vodafone. However, the government of India amended the law with retrospective effect in 2012.

Vodafone India Faces Tax Liability Of More Than Rs
27,000 Crore

<keyword id="15492" type="CITY" weightage="100" keywordseo="Vodafone">Vodafone</keyword> Global Head <keyword id="105731" type="PERSON" weightage="100" keywordseo="Vittorio-Colao">Vittorio Colao</keyword> has said that he is not worried about competition from <keyword id="3820" type="PERSON" weightage="40" keywordseo="Mukesh-Ambani">Mukesh Ambani</keyword>'s <keyword id="6354504" type="UNKNOWN" weightage="60" keywordseo="Reliance-Jio">Reliance Jio</keyword>, which is likely to start 4G services soon. He was also optimistic about the Indian market following the change of government at the Centre. 
 
Talking about Reliance's 4G services and the competition it may post to Vodafone, which did not bid for 4G licence, Colao said the company was seeing significant growth in 3G data services. "I wish Reliance all success and I am not worried by its entry. We will be good competitors. You can already do most things on 3G... our commercial success proves, we are right (in our strategy)." 
 
"I am less schizophrenic now. I am more optimistic," he said, however, he also added that the political will needs to translate into action soon. On being asked whether Vodafone would enter into an agreement with the government on the issue of tax, he said, "You can never rule out anything in an arbitration process because it is a mechanism for finding a private solution to the dispute. So, nothing can be ruled out." 
 
It’s interesting to note that Vodafone is facing a tax liability of more than Rs 11,000 crore in India.

We Are Not Not Worried About RIL’s 4G Call: Vodafone Global Head

As India’s new Finance Minister, <keyword id="42575" type="PERSON" weightage="60" keywordseo="Arun-Jaitley">Arun Jaitley</keyword>, took the oath of office administered by President Pranab Mukherjee, one wonders if the thought crossed his mind that one of the major problems he would be facing soon is the taxmen’s battles with foreign firms – a legacy handed down by the current President when he held the finance job. 
 <keyword id="15492" type="CITY" weightage="100" keywordseo="Vodafone">Vodafone</keyword>, IBM, Nokia and Shell are just some of the foreign majors embroiled in disputes with the Indian tax authorities. The sums involved are mindboggling –Vodafone is supposed to owe in the region of Rs 20,000 crore; Nokia has been hit with a Rs 2,400 crore tax claim; IBM has Rs 6,857 crore outstanding tax notice against it and Shell has been told it needs to pay an additional Rs 5,000 crore in taxes. 
 
Corporate chieftains around the globe, who might have been thinking about investing in the country, were made to rethink. There have been other consequences and Singapore finally overtook Mauritius as the preferred destination for foreign investors to route their money through, because the former provides better legal protection in cases involving foreign tax liabilities. 
 
For many observers, the genesis of these tax wars is the Vodafone dispute. When the Supreme Court decided in favour of the telecom major on whether it owed taxes to the Indian exchequer over its acquisition of the Indian operations of Hong Kong-based Hutchison Whampoa, the then Finance Minister Pranab Mukherjee went to the unprecedented extent of revising the tax laws to introduce a retrospective liability. 
This, at a time, when India’s most important selling pitch against its ‘bigger and better’ rival China was that the rule of law and the independence of the judiciary system prevailed in the country unlike the wheeling and dealing that happened behind the bamboo curtain in China. 
 Fast forward a few years and you found India’s economy in the doldrums – recording sub-5% <keyword id="35050" type="CITY" weightage="80" keywordseo="gdp">GDP</keyword> growth. The long-term consequences of India’s tax adventurism are certainly being felt even now. The new BJP government has two courses it can pursue. One is to introduce more clarity and transparency in laws governing areas like transfer pricing and M&amp;A, which typically bedevil foreign investments. The other is to speed up the arbitration proceedings in cases like Vodafone, which got completely tangled up in the previous government’s larger dysfunction. 
 
Unfortunately, once the precedent has been set and it has been proved that the Indian government can go to the extent of changing laws retrospectively to get its way, it could be extremely difficult to convince investors that similar instances will not take place in the future. And the same applies for the industries, especially when laws like the Land Acquisition Act was pushed through by the UPA government. It is obvious that the Pandora’s Box can easily open if governments have an agenda to pursue. 
 
Meanwhile, Prime Minister Narendra Modi inherits a fragile fiscal situation and he will have to consult with Jaitley (the latter has to present the new Budget) whether making major tax concessions is possible in the present state of government finances. 
 As the BJP must have found out during its poll campaign, it is easier to make ambitious promises in the heat of the battle, like its proposal to abolish <keyword id="6354751" type="COMPANY" weightage="100" keywordseo="Income-Tax">income tax</keyword>, than implement them when the time arrives. 
 
Maverick leaders of the BJP, such as Subramanian Swamy, who went to town against the UPA’s tax terrorism, do not find a place in the new government. Instead, Jaitley’s background as a high profile lawyer might provide just the skills he needs as he tries to untangle the legal wrangles that the policies of the previous regime has left for him to deal with. 
Image: Thinkstock

Taxes
That Could Hinder India’s Growth Story

With retrospective <a href="http://www.businessinsider.in/budget-2016/tax">taxation</a> continuing to rile foreign investors, the Budget tomorrow may look to address their concerns with a view to resolving the legacy issues. 
 Chief Economic Advisor <keyword id="6355547" type="PERSON" weightage="20" keywordseo="Arvind-Subramanian">Arvind Subramanian</keyword> said that the present government is taking "consistent steps" to deal with the legacy tax issues to regain investor confidence. 
 
"Slowly, slowly they (government) are cleaning up the legacy issue. I think they will continue to do so going forward and hopefully so in the Budget. It's a long drawn agenda that we need to clean up tax system," he said. 
The continuation of multi-billion dollar tax liability imposed by the previous UPA government using a retrospective legislation, has been a matter of concern for foreign investors who had hoped that the BJP government will quickly resolve them. 
 
 
Earlier this month, the tax department took the unusual step of sending a reminder notice to Vodafone for payment of Rs 14,200 crore of taxes on an issue that is under arbitration. 
 
Even after two years, the arbitration in the <a href="http://www.businessinsider.in/searchresult.cms?query=Vodafone+">Vodafone</a> case has not yet started in absence of appointment of a presiding judge on a three member arbitration panel. 
 
The Rs 10,247 crore tax issue of Cairn Energy Plc of UK could manage to get a full panel constituted, even though the process started much later than Vodafone, only after the issue was brought to the notice of Prime Minister's Office. 
 Both Prime Minister <keyword id="6354477" type="PERSON" weightage="20" keywordseo="Narendra-Modi">Narendra Modi</keyword> and Finance Minister <a href="http://www.businessinsider.in/searchresult.cms?query=Arun+Jaitley+">Arun Jaitley</a> have repeatedly stated that no new tax liability would be created using the retrospective law, the lingering of the disputes has not gone down well with foreign investors. Many of them had hoped that the government may use the A P Shah panel that had sorted out the contentious issue of levy of <keyword id="73398" type="ORGANIZATION" weightage="20" keywordseo="MAT">MAT</keyword> on capital gains made by FPIs and FIIs, to resolve these legacy issues. 
 
A top executive at a foreign company the easiest way to resolve these issues is to refer the pending cases to the Shah panel as they had done in the MAT issue and implement its recommendations. 
 
Subramanian said the government had proactively resolved the MAT issue and is working to do so for the remaining legacy issues.

You Searched For "Vodafone tax dispute" and got 8 results

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

BI India Bureau

Attorney General Asks Income Tax Dept To Not Appeal Against Vodafone Tax Ruling

BI India Bureau

Indian government brings in a bill to bury the infamous retrospective tax that haunted Cairn and Vodafone for nearly a decade

PTI

Vodafone case isn’t the end, clarifies Telecom Minister

BI India Bureau

Vodafone India Faces Tax Liability Of More Than Rs 27,000 Crore

BI India Bureau

We Are Not Not Worried About RIL’s 4G Call: Vodafone Global Head

BI India Bureau

Taxes That Could Hinder India’s Growth Story

Preetam Kaushik

Budget 2016 may address retrospective tax concerns, says Chief Economic Advisor Arvind Subramanian

BI India Bureau

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