The conciliation offer made by the Indian Government to Vodafone in the indirect share transfer tax row is no longer valid, the Finance Minister P Chidambaram has said.
The Indian Government would now defend the international arbitration notice issued by Vodafone, Chidambaram said while addressing the media at the AICC headquarters here on Thursday.
PTI adds: In its notice on April 17, Vodafone said it will go ahead with international arbitration, preferably in London, to resolve the long-pending tax dispute concerning its 2007 acquisition of Hutchison Whampoa’s stake in Hutchison Essar.
Vodafone gave the Government two months to reply to the notice served under the bilateral investment treaty between India and the Netherlands.
Following this, the Finance Ministry put up a proposal before the Cabinet to withdraw the conciliation offer it made to Vodafone last year.
In February, the Cabinet had put on hold a similar proposal, pending settlement of Vodafone’s transfer-pricing case at the Income Tax Appellate Tribunal (ITAT).
The ministry sought to withdraw the conciliation talks after Vodafone demanded the transfer-pricing row be clubbed with the capital gains tax case.
Vodafone said in its notice that it wanted to move ahead with the arbitration without waiting for the ITAT decision on the Rs 3,700-crore transfer-pricing case.
The Cabinet had in June 2013 approved a Finance Ministry proposal to go in for conciliation with Vodafone to resolve the capital gains tax dispute related to its 2007 acquisition.
While the basic tax demand is Rs 7,990 crore, the total outstanding is Rs 20,000 crore after including penalty.
The Supreme Court had ruled in Vodafone’s favour in 2012, saying it was not liable to pay any tax over the acquisition of assets in India from Hong Kong-based Hutchison.
The Government changed the rules later in 2012 to enable it to claim tax retrospectively on concluded deals.