UK-based Vodafone is unable to make up its mind whether to go forward with conciliation and it is now up to the revenue department to enforce the tax notice on it, Finance Minister P. Chidambaram said on Tuesday.
The Finance Ministry has already circulated a draft Cabinet note withdrawing the conciliation offer to Vodafone to resolve the Rs 20,000-crore tax dispute case.
“In Vodafone’s own words, they are unable to make up their mind whether they should go forward with conciliation. The conciliation did not even start...,” Mr. Chidambaram told PTI.
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 2007 acquisition is Rs 7,990 crore, the outstanding dues, including a penalty of a similar amount and accrued interest, run into Rs 20,000 crore.
“There is no need for a fresh notice. The notice is already there...,” Mr. Chidambaram said, adding that it is for the tax department to decide whether to enforce the notice.
The Ministry opted to withdraw conciliation talks with Vodafone International Holdings BV after the company served a supplementary notice last month to the government under the Bilateral Investment Promotion and Protection Agreement (BIPA) over the tax dispute.
The notice, sources said, demonstrates Vodafone’s reluctance to have conciliation within the scope of the terms approved by the Cabinet in June last year.
Although the Finance Ministry was keen on an amicable solution to the long-pending tax dispute, dilly-dallying by the company led to the collapse of the talks.
According to sources, Vodafone wanted to club a Rs 3,700 crore transfer-pricing case of Vodafone India Services with the capital gains tax issue, a demand that could not be accepted by the Finance Ministry.
As the matter is pending in Bombay High Court and Government of India is being represented by the Finance Ministry, the issue could not be included as part of the conciliation talks, sources said.
The Supreme Court had ruled in Vodafone’s favour in 2012, saying it was not liable to pay any tax over the acquisition of assets in India from Hong Kong-based Hutchison.
The government, later in 2012, changed the rules to enable it to make retrospective tax claims on concluded deals.