Govt seeking to tax one event twice, says Vodafone

Vodafone has been battling capital gains tax case where it was to pay up Rs 11,200 cr

British telecom major Vodafone said on Wednesday that the government is looking to tax it twice over. The company was referring to its total tax liability of Rs 20,000 crore in terms of capital gains tax of a 2007 deal to buy into Hutch Essar as well as a transfer pricing case.

Vodafone had been in talks with the government to resolve the tax issues, but in vain. It had been long battling the capital gains tax case where it was to pay up Rs 11,200 crore. In addition, the income tax department also slapped a Rs 6,700-crore tax over a transfer pricing matter. The total amount also includes penalty and interest.

“In addition to the main tax case, the government also sought, in a transfer pricing claim, to tax an alleged transfer of call options held by a company. No such transfer took place. The options were held both before and after the Hutchison Essar sale by the same company. In seeking to tax the full value of the Hutchison Essar sale and then to claim tax on an alleged transfer of options in the Hutchison Essar sale, the government is seeking to tax one event twice,” Vodafone said in a press statement.

The company claims the Supreme Court had examined the Hutchison structure and concluded that there was no transfer or assignment of call options in the Hutchison Essar sale. The company is battling two transfer pricing cases, which have been referred back to the Appellate, after they went to the Bombay High Court. The call options are now being held by Vodafone India Services (VISPL), based in Pune.

“The VISPL transfer pricing dispute on the alleged options transfer is entirely included within the dispute about tax on the Hutchison Essar sale and, as such, is included in the notices of Bilateral Investment Treaty claims against the government of India,” said Vodafone.

Government willing to restart conciliation
The government appears to be willing to restart conciliation talks with UK-based Vodafone if the telecom firm makes up its mind to settle the Rs 20,000 crore tax dispute.

A day after Finance Minister P Chidambaram said it is up to the revenue department to enforce the tax notice on the company, highly placed sources said if Vodafone makes up its mind on conciliation, it can happen in a few days.     

“If Vodafone decides to begin the conciliation, if two conciliators can be appointed, then the conciliation process should not take more than a few days,” sources said.