Tax row: Vodafone makes no provision, pins hopes on treaties

Facing a tax demand of Rs 22,100 crore from the Indian government, UK-based telecom major Vodafone today said it has not made any provision, hoping for a successful claim under the Dutch Bilateral Investment Treaty (BIT) or the UK BIT.
"Should a further demand for taxation be received by VIHBV or any member of the Group as a result of the retrospective legislation, we believe it is probable that we will be able to make a successful claim under the Dutch BIT and/or UK BIT," Vodafone said.
It added that the company did not carry a provision for this litigation or in respect of the retrospective legislation as on March 31, 2016, or previous reporting dates.

Vodafone had disputed the tax order over its acquisition of 67 per cent stake in Hutchison, now called Vodafone India, arguing that no tax was due as the transaction was conducted offshore.
But the income tax department, taking refuge under the retrospective amendment in 2012, contends that tax is due and has sent notices to the company.
"On February 4, 2016, Vodafone International Holdings BV (VIHBV) received a reminder of an outstanding tax demand of Rs 221 billion. The latest reminder threatens enforcement action if the demand is not satisfied," Vodafone said in a statement.

The statement said VIHBV served its notice of arbitration under the Dutch BIT on April 17, 2014, formally commencing the Dutch arbitration proceedings.

In March, Vodafone had moved ICJ after arbitrators appointed by it and the government of India failed to reach a consensus on selection of a neutral/presiding judge of the three-member panel.
The president of the International Court of Justice will now appoint the third arbitrator.
On June 15, 2015, Vodafone Group and Vodafone Consolidated Holdings served a trigger notice on the Indian government under the UK BIT in respect of retrospective tax claims under the Finance Act, 2012.
The Vodafone case relates to the retrospective amendment of I-T laws carried out by the UPA government in 2012 to overturn the Supreme Court verdict that had favoured Vodafone.

The basic tax demand for Vodafone was Rs 7,990 crore, but the total outstanding, including interest and penalty, is estimated to have risen to over Rs 20,000 crore.