World News – UA – Reason India May Appeal Vodafone Retro Tax Arbitration


New Delhi: « Tax claims – good or bad – are a sovereign right and can be affected by decisions of international tribunals invoking bilateral investment treaties? »

This is what a top government source told ET Now when asked if India would appeal the unanimous verdict of the international tribunal in favor of Vodafone in the infamous Rs retrospective tax case 30,000 cr India still has two cherry bites in the appeal process, starting with the High Court of Singapore

The source went on to say: « This government has been and continues to be against retrospective taxation But a bilateral investment agreement aims to protect and facilitate investment This has nothing to do with politics tax, and can India allow these conventions to be invoked for tax claims? « 

Although the Narendra Modi government has yet to decide to appeal, it appears to be looking into it for this very reason: the arbitration award citing a violation of the India-Netherlands bilateral investment protection agreement He found India in violation of the guarantee of fair and equitable treatment of the conditions set out in the treaty

« Will this open a pandora box? We are investigating whether this will set a precedent of multinational companies invoking bilateral treaties to simply delay or get out of paying taxes, » another senior government official said

When ET Now contacted the Vodafone camp, an insider said, « But then why is India signing these treaties? India signed the treaty promising fair and equitable treatment for investments, and which covers the legislature, executive and judiciary How Vodafone got & fair treatment in India The Supreme Court ruled in its favor, then a retrospective tax law is introduced just to overturn the ruling of the highest court in the country « 

India’s image as an investment destination took a serious hit when the UPA government introduced the law in 2012

Since coming to power in 2014, the Narendra Modi government led by the late Finance Minister Arun Jaitley has spoken vehemently against retrospective UPA tax changes that were seen to target Vodafone

In his 2014 Union Budget Speech, Jaitley said: « The sovereign right of the government to pass retrospective legislation is unquestionable However, this power must be exercised with extreme caution and judgment, bearing in mind mind the impact of each of these measures on the economy and the general investment climate This government will not ordinarily make a retrospective change that creates a new responsibility Members know that following certain retrospective changes to the Income Tax Act 1961 made through the Finance Act of 2012, a few cases have been raised in various courts and other legal bodies These cases are in different stages of suspense and will naturally come to their logical conclusion At this point I would like to say to this August Assembly as well as to the investment community as a whole that we are committed to providing a stable and predictable tax regime that would be investor-friendly and stimulate growth »

In 2016, in another budget speech, Jaitley attempted a one-time settlement whereby companies involved in tax disputes could pay the tax claim and be waived interest and penalties Vodafone had decided not to participate in the settlement He said in a statement: « From the outset, we argued that there was no tax to be paid, a view confirmed by the Supreme Court, and the retrospective law, in any case, concerned the tax on the gain realized by Hutchison Vodafone, as a buyer, clearly did not realize any capital gain « 

In 2007, Vodafone bought a controlling stake in Hutchison Essar for $ 11.2 billion The Indian tax service estimated that Vodafone should have withheld tax and subsequently sent a notice of Rs 11,218cr and later added penalties of almost Rs 8000 crore

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World news – UA – Reason India can appeal against retro Vodafone tax arbitration


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