The Income-Tax Department has sent a reminder to telecom firm Vodafone and has threatened to seize its assets in a tax dispute involving ₹14,200 crore.
This is at a time when both Prime Minister Narendra Modi and Finance Minister Arun Jaitley had over the weekend promised that the government would not resort to retrospective taxation.
The department said the tax is due from 2007 when Vodafone bought a 67 per cent stake in Hutchison Whampoa India in an $11 billion deal. The dispute, however, is under international arbitration.
“We can confirm we have received a reminder from the tax department that also refers to asset seizures in the event of non-payment. This dispute is currently the subject of international arbitration,” said Vodafone Group.
Noting that the government had in 2014 said that existing tax disputes, including Vodafone’s, would be resolved through the judicial process, the company said there is a “disconnect” between the government’s tax-friendly promise and the actions of the department.
The telecom firm, which is the second-largest mobile service provider in India, has argued that no taxes are payable in India since the deal was between two foreign companies. But Indian tax authorities have contended that capital gains were made on assets in India. While the initial tax demand for Vodafone was ₹7,990 crore, it is estimated to have risen to ₹20,000 crore, inclusive of interest and penalty.
Though the Supreme Court had ruled in Vodafone’s favour in 2012, the government had amended the laws retrospectively to claim taxes.
Vodafone had subsequently issued a notice for international arbitration. While Yves Fortier of Canada is Vodafone’s nominee on the arbitration panel, India has named international lawyer Rodrigo Oreamuno to arbitrate on its behalf.
The two sides are yet to name a third arbitrator to preside over the proceedings.