English
New Delhi: Vodafone has won the case against India over a retrospective tax demand of more than Rs 20,000 crore.
The Permanent Court of Arbitration located at The Hague has ruled that the conduct of India’s tax department is in breach of “fair and equitable” treatment.
Vodafone had moved the International Court of Justice (ICJ) in 2016 due to a lack of consensus between the parties’ arbitrators in finalising a judge for the tax dispute.
Following this, a tribunal was constituted in June 2016 after Vodafone challenged India’s use of a 2012 legislation that gave it powers to retrospectively tax deals like Vodafone’s $11 billion acquisition of a 67 per cent stake in Hutchison Whampoa in 2007. The retrospective tax law had been enacted after the Supreme Court judgement went in Vodafone’s favour.
Vodafone had challenged the tax department’s demand of Rs 7,990 crore as capital gains taxes (Rs 22,100 crore after including interest and penalty) under the Netherlands-India Bilateral Investment Treaty (BIT).
Buoyed by the arbitration award, Vodafone Idea stock closed 12 per cent higher at Rs 10.20.
In 2007, the Indian Income Tax department had slapped a demand notice on Vodafone seeking capital gains tax.
Meanwhile, refuting some reports that the decision means that the Government of India will now have to pay Rs 20,000 crore to Vodafone, sources said, “There is a wrong impression that government will have to return Rs 20,000 crore because of award in arbitration case invoked by Vodafone International Holding BV. India has been asked to pay about Rs 40 crore that is 60% of international arbitration tribunal’s administrative cost.”
“Rest 40% of the cost would be borne by the Vodafone. Also, the Government of India may have to refund the tax collected, which is about Rs 45 crore, only if it does not go for appeal against the award. Therefore, the total outgo would be around Rs 85 crore only,” the sources clarified.
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