Govt notifies rules to settle Vodafone retrospective tax case

After the notification of the rules, Vodafone will have 45 days to approach the government for a settlement.

Press Trust of India New Delhi
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A penalty of Rs 7,900 crore was also sought from Vodafone.

The government has notified a fresh set of rules to facilitate settlement of the retrospective tax dispute with British telecom giant Vodafone Plc.

The Central Board of Direct Taxes on October 13 notified 'Relaxation of Validation (Section 119 of the Finance Act, 2012) Rules, 2021', prescribing the forms and conditions for the declaration to be filed by the company for settling its case.

After enacting a law to scrap any tax demand levied on companies using the controversial 2012 amendment to the Income Tax Act, the government on October 2 notified rules for settling such cases.

The government has promised to refund any tax collected using such law but without any interest and subject to companies agreeing to withdraw all pending legal proceedings.

Under the rules notified, companies are required to furnish a declaration to the I-T department withdrawing all legal proceedings against the government over the levy of retrospective taxes. They are also required to indemnify the government against any future claims and commit to not seek any damage.

The first set of rules released earlier this month applies to companies such as Cairn Energy Plc of the UK which were slapped taxes after the 2012 amendment. These taxes were sought using Section 9 of the 2012 law.

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The case pertaining to Vodafone is different as taxes were sought from the company by validating an October 2010 order of the I-T department that sought Rs 11,218 crore in taxes from the British firm over its 2007 acquisition of Hutch-Essar through a deal in the Cayman Islands.

The Supreme Court had in January 2012 quashed the tax demand but the same was sought to be revalidated through Section 119 in the Finance Act, 2012.

A penalty of Rs 7,900 crore was also sought from Vodafone.

After the notification of the rules, Vodafone will have 45 days to approach the government for a settlement.

Vodafone had challenged the levy of such taxes after the 2012 legislation at an international arbitration tribunal. The tribunal overturned such a levy and asked India to reimburse legal costs. The government's liability totalled Rs 85 crore, of which Rs 45 crore collected toward the tax levy was to be refunded.

The government had challenged the arbitration award before a Singapore court.

In the case of Cairn, the government will have to return Rs 7,900 crore of taxes it had collected by selling the company's shares, withholding tax refunds, and confiscated dividend income.

Vodafone had not faced any enforcement to collect the taxes sought from it.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Oct 14 2021 | 7:51 PM IST

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