Vodafone tax row: Ex-ASG moves Supreme Court to stall arbitration

Written by fe Bureau | New Delhi | Updated: Jun 27 2014, 18:11pm hrs
The contentious issue of retrospective changes to tax laws has taken a fresh twist. Pointing out that the government has failed to discharge its statutory obligation to recover Rs 20,000-crore tax dues (including interest) from the Netherlands-based Vodafone, former Additional Solicitor General Bishwajit Bhattacharya on Thursday approached the Supreme Court to restrain it from going ahead with arbitration on the issue.

Bhattacharyya, who had resigned as the law officer during the UPA-2 regime, mentioned the matter before a vacation bench headed by Justice Vikramajit Sen. The court posted the case for hearing on July 1.

He submitted that the Centre was not implementing the rule, which was amended in 2012 to claim taxes and pleaded to the apex court to intervene in the matter by directing the government to administer the Income Tax Act, 1961 impartially, even handedly and without fear or favour.

When Parliament amends a law, and the executive creates a tax liability in furtherance of the amended law, for the executive not to enforce the law amounts to flagrant disregard of the rule of law, inviting judicial intervention in public interest, Bhattacharyya, who specialises in revenue issues, said.

It amounts to arbitrariness of state action not to enforce law (Section 9 of IT Act) for 27 months after its enactment. This violates Article 14 of the Constitution, the petition said, adding, allowing arbitration proceedings under India-Netherlands BIPA (Bilateral Investment Protection Agreement) would flagrantly violate rule of law.

He submitted that the Act does not recognise conciliation as a dispute settlement mechanism and the tax dispute do not come within the ambit of BIPA.

A tax demand cannot be stretched to be given 'national treatment,' Most Favoured National Treatment through the gateway of Article 4 of the India-Netherlands BIPA, bypassing the 1961 Act or in conflict with it. Besides, it is settled law that treaty obligation have to be in harmony with domestic legislation and cannot be in conflict with it... the former law officer said in his petition, adding that in any event the amended Section 9 of the 1961 Act does not discriminate against any assessee and is uniformly applicable to all similarly situated assessees.