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Finance Ministry working towards amicable resolution of Vodafone tax case

New Delhi:

The Finance Ministry is working towards an amicable resolution of the retrospective tax amendment issue that could provide some relief to British telecom giant Vodafone, which is facing a tax liability of Rs 11,200 crore.

The proposals, to be based on the recommendations of the Shome panel, are likely to be introduced in the Finance Bill to be presented by Finance Minister P Chidambaram in the Budget for 2013-14.

"The government is constantly addressing concerns of investors. There will be amicable resolution of the issue (Vodafone tax case) in the Budget," a top Finance Ministry official told PTI.

Vodafone is facing a tax liability of Rs 11,200 crore following its acquisition of Hong Kong-based Hutchison Whampoa's stake in 2007 that included its Indian telecom business.

The problem arose after the then Finance Minister Pranab Mukherjee amendment the Income Tax Act, 1961 with retrospective effect to undo the Supreme Court judgement that had ruled in favour of the company.

In view of the concerns expressed by international and domestic investors, the government had appointed a committee under tax expert Parthasarthi Shome to look into the issue.

The committee had suggested that either the government should withdraw the retrospective tax amendment or waive the penalty in case it had to recover the taxes.

The government will be taking a call on the suggestions of the Shome panel. The changes in the Income Tax Act, however, are likely to be introduced in the Budget to be unveiled in the Lok Sabha on February 28. Vodafone's non-executive chairman Analjit Singh has been meeting the senior Finance Ministry officials over settlement of the tax dispute.

Meanwhile, the Revenue Department had issued a reminder notice to Vodafone asking it to clear the tax dues. The company, however, maintains that no taxes are payable and already replied to the reminder notice from the tax department.

The revenue department, it is learnt, will soon be sending its reply to the representation made by the Vodafone.

Last April, Vodafone had also threatened the Indian government with arbitration proceedings in its fight over the retrospective tax proposal. 

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