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Vodafone wins international arbitration against India in retro tax case

New Delhi: Vodafone Group Plc on Friday announced that it has won an international arbitration against India over retrospective tax demand of ₹20,000 crore.

The telecom giant had approached the Singapore International Arbitration Centre in 2016 against the government’s decision to impose a tax liability on it.

According to a report by news agency Reuters, the Singapore International Arbitration Centre ruled that the New Delhi’s imposition of a tax liability on Vodafone is in breach of the investment treaty agreement between India and the Netherlands.

The tribunal further ruled that the conduct of India’s tax department violated “fair and equitable” treatment.

After winning the international arbitration against India, Vodafone Idea’s scrip on BSE surged and closed at Rs 10.20 which is 12 per cent higher.

India had enforced a demand notice on Vodafone, seeking capital gains tax. The UPA government, under then Prime Minister Dr Manmohan Singh, had raised a tax demand of Rs 11,000 crore to Vodafone’s USD 11 billion acquisition of Hutchison Telecom stake in 2009.

The UPA government had said that the Hutchison-Vodafone deal was liable for tax deduction at source (TDS) under the Income Tax (IT) Act.

The company then in 2016 moved the International Court of Justice (ICJ) due to a lack of consensus between the parties’ arbitrators in finalising a judge for the tax dispute. “The Indian Government has raised objections to the application of the treaty to Vodafone International Holdings BV’s (VIHBV’s) claims and to the jurisdiction of the tribunal under the Dutch BIT,” it had said.

In June 2016, a tribunal headed by Sir Franklin Berman was set up after Vodafone challenged India using a 2012 legislation that gave it powers to retrospectively tax deals like Vodafone’s USD 11-billion acquisition of 67 per cent stake in the mobile-phone business owned by Hutchison Whampoa in 2007. Vodafone challenged the demand of Rs 7,990 crore in capital gains taxes (Rs 22,100 crore after including interest and penalty) under the Netherlands-India Bilateral Investment Treaty (BIT).

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