Union Budget 2014: Vodafone to go ahead with arbitration

Mumbai, Jul 10: Telecom major Vodafone, which is locked in a Rs 20,000-crore tax dispute, today said it will continue with the arbitration process as the government has decided not to drop retrospective tax laws in existing cases.

“We note the Finance Minister‘s announcement that all existing cases arising from the 2012 retrospective tax law should follow the lawful process in which they are currently being adjudicated.

“Vodafone will, therefore, continue the process of international arbitration initiated under the India- Netherlands bilateral investment treaty,” the telecom major said in a statement soon after the Budget announcement.

While presenting the Budget, Finance Minister Arun Jaitley said, “all the existing tax disputes, arising out of Retrospective Amendment to the Income Tax Act of 1961 and are pending in courts will be allowed to reach their logical conclusions. (But) this government will not ordinarily bring any change retrospectively which creates a fresh liability.”

He also noted that “the sovereign right of the government to undertake retrospective legislation is unquestionable. However, this power has to be exercised through extreme caution and judiciousness keeping in mind the impact of each such measure on the economy and the overall investment climate.”

Vodafone, which had won the tax case in the Supreme Court, said that “from the outset, we have maintained that there was no tax to pay, a view upheld by the Supreme Court, and the retrospective law in any case concerned tax on the gain made by Hutchison.Vodafone, as the buyer, clearly made no capital gain whatsoever.”

“The notion of a retrospective withholding obligation is both unjust, and as noted in the Shome report constitutes ‘imposition of a burden of impossibility of performance’,” the company added.