Finance ministry seeks early disposal of Vodafone transfer pricing case
NEW DELHI: The finance ministry will soon write to British telecom major Vodafone to press the company to seek an early decision from the Income-tax Appellate Tribunal (ITAT) in the Rs 8,500-crore transfer pricing case.
The Union Cabinet had, on February 28, directed the finance ministry to wait for the ITAT decision in the transfer pricing case before closing the doors on Vodafone for an amicable settlement of the bigger Rs 20,000-crore tax case relating to the company’s acquisition of Hutchison Essar in 2007.
The Cabinet had also directed the finance ministry to request ITAT for expeditious disposal of the transfer pricing case and ask Vodafone to seek an early hearing. “The letter would be sent in a day or two,” a senior ministry official told ET.
India is treading cautiously on the tax dispute, which drew criticism from foreign investors after the government amended the law retrospectively in 2012-13 to overturn a Supreme Court judgment that favoured Vodafone in the Rs 8,000-crore tax case.
The government had imposed a principal tax liability of Rs 7,899.9 crore on Vodafone for failing to deduct tax on the payment made to Hutchison. Including interest and penalty, the amount has swelled to over 20,000 crore.
The government had made a conciliation offer to Vodafone to settle the dispute, but the finance ministry had approached the Cabinet to withdraw the offer for amicable settlement after conciliation talks with Vodafone made little headway in the last eight months. Vodafone insisted on having arbitration under the United Nations Commission on International Trade Law and clubbing transfer pricing case with the original one. The conciliation was expected to knock off penalty and interest from the overall tax demand.
The company also sent a reminder to the Indian government on invoking international arbitration under India-Netherlands bilateral investment promotion agreement, including the transfer pricing case.
The government would take a call on inclusion of the transfer pricing case within the ambit of the ongoing conciliation or calling off the process after ITAT’s decision. The transfer pricing case pertains to the sale of Vodafone’s call centre, Vodafone India Services, to a Mauritius-based company and valuation of shares. It involves a transfer pricing adjustment of 8,500 crore and a tax liability of Rs 3,700 crore.
Credit: The Economic Times