Vodafone takes legal action as govt plans Rs 20000 crore tax ...

A day after the Lok Sabha approved the?Finance Bill?the government suggested that it would raise a tax demand of Rs 20,000 crore on Vodafone, even as the?British companysaid that it was disappointed with move and will take all possible steps to safeguard its shareholders? interests.

?We are studying the legislation as amended, and will take all possible steps to safeguard our shareholders? interests. It would be grossly unjust if, on the basis of legislation passed five years after the event,?Vodafone?were to be charged tax on a gain made by someone else, especially where the Indian?Supreme Court?unambiguously ruled that no tax was payable in India according to the laws of India in force in 2007. Given this clarity, there was no legal basis for Vodafone to withhold tax,? the telecom company said in a press release.

Vodafone had earlier served a notice on the government under the India-Netherlands investment protection agreement, threatening international arbitration if the validation clause inserted in the Finance Bill was not dropped. The government, however, went ahead and got the Lok Sabha to endorse its proposal to amend the?Income Tax Act?from 1962 in a bid to tax overseas acquisitions involving interests or assets in India.

The statement came within hours of?finance secretary?RS Gujral?s interview to a television channel where he said that the tax department will make a claim of over Rs 20,000 crore. The income tax department has maintained that it would have to pay Rs 7,900 crore as capital gains ?as an agent? of?Hutch, whose stake it had bought five years ago. In addition, Gujral said the company will have to pay another Rs 7,900 crore as penalty and interest, which at that time had been computed at Rs 4,300 crore.

Referring to the validation clause in the Finance Bill, the finance secretary said, ?Based on that, whatever has been the demand stands validated. Consequently the demand, the interest and the penalty, those orders would stand validated. Once the Finance Bill is passed, perhaps the show-cause notice would require the interest amount to be updated because the interest calculation was up to an earlier period, and then taken forward.?

On its part, Vodafone said it was disappointed as ?despite very widespread concern in India and internationally, the government has not seen fit to propose amendments to address the uncertainty caused by retrospective tax legislation?.

The company, however, said that it remains committed to India and cited the Rs 50,000 crore it had invested since entering the market in 2007 and said it had paid over Rs 29,000 crore in taxes. To underline our commitment for the long term, despite making considerable investments over the past five years, Vodafone has yet to take a single rupee out of the country.

TOI

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