British dy PM discusses Vodafone, Cairn tax issues with Jaitley

The controversial Vodafone and Cairn taxation issues figured in a meeting between British Deputy Prime Minister Nick Clegg and Finance Minister Arun Jaitley on Monday.

Sources said Jaitley explained the Indian government's position on retrospective amendment to the Income Tax to the visiting dignitary.

India has maintained that the legal process will continue in the Vodafone case, while the high-level committee of the Central Board of Direct Taxes (CBDT) will look into cases where the legal process has not yet been initiated.

In his Budget speech in July, Jaitley had clarified that the government would not ordinarily bring about any change retrospectively, which could create fresh tax liability.

British telecom giant Vodafone is facing a tax liability of about Rs 20,000 crore because of retrospective tax amendment carried out by the previous United Progressive Alliance government. The dispute will now be resolved through arbitration, after earlier conciliation process did not materialise.

As regards the Cairn Energy tax case, the high-level committee of the CBDT will take a view with regard to the resolution of the dispute. The sources said the CBDT committee would not take the Cairn case and, hence, it would also have to go through a legal process.

The energy company faces a potential tax demand on an alleged Rs 24,500 crore of capital gains it made in 2006 following the transfer of its India assets to a new company, Cairn India. Besides taxation matters, the issues concerning investment in sectors such as energy, aerospace and education also figured during the discussion. The British deputy prime minister also met Prime Minister Narendra Modi.

Clegg expressed his desire to work with India in realising the new government's goal of economic and social transformation.

"Expressing deep appreciation for the ambitious goal of India's economic and social transformation that the new government under the leadership of Prime Minister Modi had set, he (Clegg) conveyed the desire of the UK to work together with India in realising this goal," said a statement issued by the Prime Minister's Office. Modi expressed appreciation for British Prime Minister David Cameron's personal interest and commitment to India-UK relationship.

He called for greater collaboration between the two countries in areas of education, skill development, clean energy, infrastructure development and cleaning of rivers.

The UK side, which also included UK Secretary of State for Energy and Climate Change Ed Davey, appreciated Gujarat's track record in clean energy and preservation of environment, the statement noted. Modi said it is a priority area for his government, which plans to develop 500 model towns in India with facilities for solid waste management and waste water treatment. The statement also noted that the government wants to develop all Himalayan states as 'organic states', which would have environmental benefits.

Modi invited the UK to partner in these efforts. He also asked the international community to take steps to provide clean technology to developing and under-developed countries at affordable prices.