While the apex court?s decision on the three-year-old Vodafone tax case is still awaited, a parallel process of mutual agreement as laid down in the double taxation avoidance agreement between India and the Netherlands could also decide the final outcome.
Under the mutual agreement procedure (MAP) in the DTAA between India and the Netherlands ? where Vodafone is registered? competent tax authorities of both the nations can decide upon the Rs 12,000-crore tax claim the company is facing in India for the 2007 acquisition of Hutchison’s mobile business here.
The Dutch government has been in discussion with Vodafone under the DTAA provision and has also initiated a formal talk process.
Legal expert Mukesh Bhutani of BMR Associates said, “The process of arriving at a mutual settlement can run parallel with the court process. Under the DTAA, India and the Netherlands can avail this option too.”
While the Indian tax authorities have asked Vodafone to pay up Rs 11,218 crore within 30 days, the British firm disagreed and moved the Supreme Court challenging the Bombay High Court order which said Indian tax authorities had jurisdiction over tax bills in cross-border deals.
The Bombay High Court, had ruled on September 8 that Indian authorities have the jurisdiction to seek taxes from Vodafone because the underlying assets were in India. While Hutchison profited from the sale, the Indian tax department has pursued Vodafone, saying in this case the company should have withheld the tax from its payment to Hutchison.