Arbitration verdict against India, know what the government said

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Highlights:

  • Government of India gets a major shock in the tax dispute case with Vodafone
  • International Arbitrator Tribunal ruled in favor of the company
  • The government said it would consider all options, including legal remedies

new Delhi
The government said on Friday that it would consider all options, including legal remedies, in the Vodafone arbitration case. The government said this after the international arbitration court decided in favor of the company regarding the taxation of Vodafone on the previous date. Britain’s telecom company Vodafone Group plc has won a case fought in an arbitration court in the Income Tax Department’s tax demand of Rs 22,100 crore under the applicable tax law from the previous date.An international arbitration tribunal on Friday ruled that India’s demand for tax from the previous date is against fair dealing under the bilateral investment protection agreement. The Finance Ministry said in a statement that it has just received information about the decision in the arbitration case filed against the Government of India by Vodafone International Holding BV.

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According to the statement, ‘The government will study the decision and all aspects in the case in consultation with its lawyers. After deliberations, the government will consider all options and decide on other proceedings, including legal remedies, at the appropriate forum. After the verdict, the liability of the Government of India in this case will be limited to about 75 crores. This includes a cost of Rs 30 crore and a tax refund of Rs 45 crore.

What was the matter
Vodafone had challenged the case in the arbitration court against the tax demand made by the Indian government under the previous taxation law. The government, through a law passed in 2012, acquired the right to tax the deals done on the previous date. Under the same law, the government had demanded capital gains tax in Vodafone’s $ 11 billion deal to buy 67 percent stake in Hutchison Whampoa’s India-based mobile phone business.

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The deal was signed in 2007 between Vodafone and Hutchison. The company challenged the Indian government’s tax demand under the Netherlands-India Bilateral Investment Treaty (BIT) in an international arbitration court. The company was demanded Rs 7,990 crore (including interest and penalties including Rs 22,100 crore) as capital gains tax in the deal.

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