Cabinet may consider Vodafone tax issue next week

Vodafone is facing a tax liability of Rs 11,200 cr for purchase of Hutchison Whampoa's stake in its Indian telecom business

The government is likely to take a view on the Rs 11,200-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. A proposal to settle the row has gone to Law Ministry," the official said.

At a customary post-Budget interaction with business chambers, 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," Chidambaram had said.

Vodafone, which is facing a tax liability of Rs 11,200 crore for purchase of Hutchison Whampoa's stake in its Indian telecom business Hutchison Essar in 2007, had written to the Finance Ministry seeking settlement of the tax issue.

This follows Finance Ministry's reminder notice to the UK- telcom giant Vodafone in January for payment of tax.

The Vodafone tax liability arose due to amending of the Income Tax Act, 1961, with retrospective effect during the tenure of the then Finance Minister Pranab Mukherjee to undo the Supreme Court judgement that had ruled in favour of the company.

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.