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British Telecom Firm Vodafone Wins $2.73 Billion Tax Arbitration Case Against Indian Government

© AP Photo / Martin MeissnerVodafone Logo
Vodafone Logo - Sputnik International
The British Telecom player Vodafone was trapped in a tax dispute after it bought Indian mobile assets from Hutchison Whampoa in 2007. The then Manmohan Singh government said that Vodafone was liable to pay taxes on this transaction but the company contested the claim.

India's Ministry of Finance said on Friday that the award in the arbitration case worth $2.73 billion invoked by Vodafone International Holding BV against Government of India has been passed. Vodafone, which merged with India's Idea telecom in 2018, has customer base of nearly 320 million in India.

"The Government will be studying the award and all its aspects carefully in consultation with our counsels. After such consultations, the Government will consider all options and take a decision on further course of action including legal remedies before appropriate fora," a statement issued by the India's Ministry of Finance reads. 

An international arbitration tribunal in The Hague has ruled in favour of Vodafone in a matter pertaining to imposition of retrospective tax dating back to 2012.

The tribunal ruled that the tax demand along with interest and penalty imposed on Vodafone, violated the investment treaty agreement between India and the Netherlands.

“The [Indian tax department's] conduct in respect of the imposition on [Vodafone] of an asserted liability to tax ... is in breach of the guarantee of fair and equitable treatment laid down in Article 4(1) of the Agreement, as is the imposition of interest on the sums in question and imposition of penalties for non-payment of the sums in question,” the Arbitration Tribunal said in its ruling.

The tribunal also ordered the Indian government to pay $5 million to Vodafone as compensation towards legal costs.

The tax dispute started in 2007 when Vodafone bought Hutchison Whampoa through the former's subsidiary in the Netherlands.

After the deal, the Indian government said that Vodafone needed to pay tax on asset transfer and raised the tax demand, which Vodafone contested in the Indian court. In 2012, the Supreme Court of India ruled in favour of Vodafone. However, after the Supreme Court ruling, the Indian government amended the tax laws retrospectively to bring the deal under the tax net and raised demand of $2.73 billion.

Recently, the Indian telecom firms also got a major relief from the Supreme Court in matter pertaining to payment of statutory dues to the Indian government. The Supreme Court allowed staggered payment of statutory dues worth $20 billion to the government. As per the ruling the payment can be done over the next 10 years, with the date commencing from April 1 next year.

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