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Updated: October 22, 2010 15:52 IST

Foreign fund inflows up despite Vodafone tax issue: CBDT

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CBDT Chairman S.S.N. Moorthy. File photo: S. Subramanium
The Hindu
CBDT Chairman S.S.N. Moorthy. File photo: S. Subramanium

The tax dispute with telecom major Vodafone has not impacted foreign fund inflows into the country which have increased substantially in the last fiscal, a top Income Tax official said Friday.

“The issue (Vodafone tax liability) has not impacted foreign funds inflow,” Central Board of Direct Taxes (CBDT) Chairman S.S.N. Moorthy told reporters on the sidelines of an event here. “Foreign funds inflows have increased in 2009-10 as compared to 2008-09,” the official said.

Meanwhile, as per government data, foreign direct investment (FDI) — which is part of the overall fund inflows — declined by five per cent in 2009-10 to $ 25.88 billion from $ 27.33 billion in the previous fiscal because of uncertainty in the global economic environment. However, there has been an increase in short term foreign fund inflows.

Mr. Moorthy’s comments come against the backdrop of a section of India Inc. voicing apprehensions that the huge tax liability raised against Vodafone could discourage multi-nationals from investing in India. The Income Tax department has finalised the tax liability claim against Vodafone at around Rs. 12,000 crore, he said. The Tax Department is likely to issue a fresh tax demand notice to Vodafone amounting to around Rs. 12,000 crore on Friday.

The Supreme Court had on September 27 issued notices to the tax authorities directing them to decide within four weeks the liabilities of Vodafone.

It had refused to offer any immediate relief to the company, which has challenged the Bombay High Court order allowing the government to tax the company’s $ 11-billion buyout deal with Hutch in 2007.

The case will come up before the Supreme Court on October 25.

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