Willing to discuss tax liability issue with Voda, says finmin

The finance ministry today agreed to discuss the Rs 11,200 crore tax liability issue with Vodafone and said it is working towards an amicable resolution of the retrospective tax amendment issue that could provide some relief to Biritish telecom giant Vodafone.

“Finance Ministry has replied to Vodafone on tax case. The revenue department has written that both the Secretary and the CBDT Chairman are keen to talk to settle the issue,” a senior finance ministry official said.

In its reply to the tax reminder notice sent by the revenue department last week, Vodafone had said it believes it is not liable to pay tax for its $11.2 billion acquisition of Indian telecom business of Hutchison Whampoa.

The tax case relates to capital gains tax arising from the sale of telecom business by Hong Kong-based Hutchison Whampoa that involved Indian assets to Vodafone in 2007. The reminder did not include any deadline for payment of the tax.

The Income Tax department on October 22, 2010 passed an order determining a tax liability (including interest) of Rs 11,218 crore on Vodafone for the deal which took place in Cayman Islands in 2007.

The Supreme Court, however, quashed the order in January 2012. After the apex court’s ruling, the Income Tax Act was amended with retrospective effect to bring into the tax net such overseas merger and acquisition deals that involve Indian assets.

Section 119 of the Finance Act, 2012, seeks to validate the October 2010 order of the Income Tax department. The department had also passed an order imposing a penalty of Rs 7,900 crore on Vodafone in April, 2011.

PTI