Vodafone says it responded in time to govt on Rs 20,000 cr capital gains tax case

Written by PTI | New Delhi | Updated: Feb 20 2014, 03:39am hrs
Vodafone today countered the government's assertion of a breakdown in talks over its tax dispute and said capital gains from the Hutchison transaction and a separate transfer pricing notice relate to the same deal and should be considered together for conciliation.

"The Vodafone India Services (VISPL) transfer pricing dispute on the alleged options transfer is entirely included within the dispute about tax on the Hutchison Essar sale," Vodafone said in a statement.

The UK telecom company also said it responded in time to all government communication on the conciliation process initiated to resolve the Rs 20,000 crore capital gains tax case arising from its purchase of a stake in Hutchison Essar.

The statement came a day after Finance Minister P Chidambaram told PTI in an interview that Vodafone has not been able to make up its mind on whether to go forward with conciliation and it is up to the revenue department to enforce the tax notice on it.

Vodafone said in seeking to tax the full value of the Hutchison Essar sale and then to claim tax on an alleged transfer of options in the Hutchison Essar sale, "the government is seeking to tax one event twice."

Conciliation talks had broken down after Vodafone International Holdings BV issued a supplementary notice to the government, invoking the Bilateral Investment Promotion and Protection Agreement, and demanded that the transfer-pricing case be clubbed with the capital gains tax matter.

Vodafone said that it had entered into discussions with the Indian government in good faith, with a desire to achieve a fair outcome acceptable to both parties.

"Throughout, Vodafone has responded to the government's queries in a timely manner, notwithstanding, at one point, a six-month delay by the Indian government in responding to correspondence sent by Vodafone," the statement said.

The Cabinet had in June 2013 approved a Finance Ministry proposal to go in for conciliation with Vodafone to resolve the capital gains tax dispute related to its acquisition of Hutchison Whampoa's stake in Hutchison Essar in 2007.

While the basic tax demand for the acquisition is Rs 7,990 crore, outstanding dues, including a penalty of a similar amount and accrued interest, run into Rs 20,000 crore.

Vodafone sought to club a Rs 3,700 crore transfer-pricing case of VISPL with the capital gains tax issue, a demand that was not acceptable to the Finance Ministry.

"In fact, no such transfer took place, the options were held both before and after Hutchison Essar sale by the same company," Vodafone said.

The I-T department slapped a tax liability of Rs 3,700 crore in the share transfer case from its subsidiary VISPL.

"From the outset of the discussions, Vodafone has made it clear that any negotiated resolution would need to encompass all aspects of the Hutchison Essar sale considered by the Supreme Court in reaching its verdict in 2012," it added.