A tax dispute relating to the 2007 acquisition of Hutchison Whampoa’ stake in Hutchison Essar by Vodafone has been doing the rounds in news lately. The British telecom major was asked to pay an amount of Rs 11,200 as tax on the acquisition. However, Vodafone has now responded to Finance Ministry’s proposal for a non-binding conciliation to settle the tax dispute. The company hasn’t clearly shown that if they have accepted the offer for out of court settlement from the government.
Vodafone had been insisting on conciliation under the UNCITRAL but still hasn’t replied to any email enquiry; however a top official from PTI has confirmed that they have received company’s response to the offer. Finance Minister P Chidambaram recently said that the company was asked to respond by 31st December 2013 on the proposal. The non-binding conciliation was approved by the Cabinet in June in order to resolve the long-standing tax dispute with the British telecom major.
Parliament will be ultimately vetting the outcome of conciliation as it will be required to make an amendment to the Income-tax Act as well. The conciliation was not proposed under the UNCITRAL but the Indian arbitration law, however, there is no timeframe set for conclusion of the proceedings of the conciliation.
The Supreme Court of India ruled in favour of Vodafone last year stating that the company is not liable to pay any taxes over the acquisition of mobile phone assets in India from Hutchison. However, later in the year, the government changed the rules that allowed making retroactive tax claims on deals that were already concluded.