Barcelona, February 26, 2018
British telecom giant Vodafone plc, one of the two companies that were slapped with tax demand using a retrospective legislation, today said its fight against the Rs 22,100 crore tax demand would be helped by Finance Minister Arun Jaitley terming the move as an erroneous decision.
“Retrospective taxation is wrong from the fact that we were also taxed for capital gains that were made by somebody else. This was a double wrong, not just a single wrong. We just have confidence in the arbitration and wait for the results of the arbitration. And, of course, the comments from the Finance Minister helps,” Vodafone Group CEO said here. He was commenting on Jaitley’s comments in New Delhi on Saturday that termed the retrospective taxation as erroneous decision and the BJP-led NDA government had after coming to power decided not to use the 2012 legislation to create new tax demand.
“I noticed the comment of Finance Minister (Arun Jaitley). They are useful because they actually stated the something we have been saying for years. Retrospective changes in taxation are not something good. I welcome the comments from the Hon’ble Minister and even more convinced that we are right,” Colao said. Besides Vodafone, the government had also raised Rs 10,247 crore tax against another British company, Cairn Energy plc, using the same retrospective legislation.
Vodafone has challenged the tax demand before an international arbitration tribunal. The tribunal, headed by Sir Franklin Berman, was constituted in June 2016 after Vodafone challenged India using a 2012 legislation that gave it powers to retrospective tax deals like Vodafone’s USD 11 billion acquisition of 67 per cent stake in the mobile phone business owned by Hutchison Whampoa in 2007.
Vodafone challenged the demand of Rs7,990 crore in capital gains taxes (Rs22,100 crore after including interest and penalty) under the Netherlands-India Bilateral Investment Treaty (BIT). The demand has been because the company allegedly failed to deduct tax on capital gains made by Hutchison from the 2007 deal. Cairn was slapped with the tax demand in January 2014 over alleged capital gains made in a 2006 internal business reorganisation of India unit.
[The Financial Express]