Cabinet likely to discuss Vodafone settlement issue next week

Resolution of the tax dispute to pave way for Fin Min to go to Parliament with changes in retrospective amendments to IT-Act

The Cabinet might take up the issue of settling the standoff between Vodafone and the Income-Tax (I-T) Department next week.

Asked when the issue would come before the Cabinet, Finance Minister P Chidambaram said: “May be next week. It (a proposal to settle the row) has gone to the law ministry.”

Earlier this week, at the customary post-Budget interaction with business chambers, he had said: “We have decided the appropriate time to go to Parliament would be after we have been able to resolve the Vodafone case.”

“I think without resolving the Vodafone case, if we go to Parliament, (they will) say, “Last year, you came to us, we amended the Act. This year, you are coming to us to amend it again. What happened to the Vodafone case? What will I answer?” he had asked.

The finance ministry had last year sent a reminder to Vodafone to pay Rs 14,000 crore of I-T arrears which the telecom major said it did not owe. The issue relates to tax liability for Vodafone’s 2007 acquisition of Hutchison Whampoa’s telecom assets in India, a deal done outside the country, between principals with headquarters elsewhere.

Vodafone later offered conciliation. “If the Cabinet accepts, the matter will go to conciliation,” Chidambaram had said.

Last year, the finance ministry under Pranab Mukherjee had pushed retrospective amendments to the I-T Act, taking effect from 1962. This was after the Supreme Court struck down the tax department’s contention on jurisdiction to tax Vodafone on the $11-billion deal of 2007.

The Parthasarathi Shome panel, appointed after Mukherjee quit the ministry to contest the Presidential poll, recommended that only in very rare cases should application of tax occur with restrospective effect. Even if it was done, the tax should fall on the seller (Hutchison was seller in Vodafone case) and not on the buyer.