Cabinet may consider Vodafone tax issue next week

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The government is likely to take a view on the Rs 11,217-crore Vodafone tax case next week, a top Finance Ministry official has said."The issue (Vodafone tax dispute) may come before the Cabinet next week," the official said.

The Law Ministry recently gave its go-ahead for a conciliatory out-of-court settlement of the tax dispute with British telecom major Vodafone.

After presenting the Budget 2013-14, Finance Minister P Chidambaram had said: "We have decided the appropriate time to go to Parliament would be after we have been able to resolve the Vodafone case."As far as Vodafone is concerned, they had written to us proposing conciliation. We have written back saying that yes your request will be considered by the competent authority. So, the matter will go to the Cabinet."

Vodafone is facing the tax liability of over Rs 11,217 crore for purchase of Hong Kong-based Hutchison Whampoa's stake in Indian telecom business Hutchison Essar in 2007.

Although the UK-based giant had won the tax case in the Supreme Court (January 2012), the government had amended the Income-tax Act, 1961 with retrospective effect to undo the ruling.

Following that, the Income Tax Department had issued a letter in January to Vodafone International Holdings BV stating that the company is required to pay tax demand of about Rs 11,217 crore along with interest.

However, Vodafone replied back saying that they do not owe anything to the Indian government.

Vodafone earlier wanted to take India to international arbitration but later offered conciliation on the issue.

The government is working towards a solution based on recommendations of the Parthasarathi Shome panel which suggested that either government withdraw the retrospective tax amendment or waive interest and penalty in case it had to recover the taxes.