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Updated: September 4, 2012 03:05 IST

No rash action in Vodafone case: Chidambaram

Special Correspondent
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Union Finance Minister P. Chidambaram at the inauguration of Conference of Commissioners and Director General of Income Tax, in New Delhi on Monday. Photo: Sandeep Saxena
The Hindu Union Finance Minister P. Chidambaram at the inauguration of Conference of Commissioners and Director General of Income Tax, in New Delhi on Monday. Photo: Sandeep Saxena

Finance Minister P. Chidambaram, on Monday, stressed the need for abundant caution in the Vodafone tax case, saying there would be no “rash” action by the tax authorities and the issue would be decided after considering all aspects of the case. “They (I-T assessing officers) are not going to act rashly. These are not small amounts on which you can take a rash decision,” Mr. Chidambaram said after his meeting with top officials of the Central Board of Direct Taxes (CBDT). The basis of a decision on the Vodafone case, he said, would also be the recommendations of the Shome Committee on indirect transfer of assets.

The scope of the terms of reference of the Shome panel, it may be recalled, has been expanded to include all non-resident tax payers instead of only FIIs.

In response to a query on whether the tax authorities would send a notice to Vodafone for collection of dues following amendment in the Income Tax Act to bring in the retrospective provisions, Mr. Chidambaram said: “There is Section 119. There is a Supreme Court judgment. There is opinion of the Attorney General. All this have to be studied by the assessing officer and his supervising officers...They will study all that. In the meanwhile, we will get the Shome committee's report also.”

While the draft report of the Shome panel submitted to the Finance Ministry last week mainly contained recommendations pertaining to the GAAR provisions, the final report to be submitted by September 30 will include its suggestions and guidelines on retrospective taxation also. The Vodafone case pertains to the Income-Tax Department passing an order on October 22, 2010, which determined a tax liability (including interest) of Rs.11,218 crore on the British telecom major on acquisition of Hutchison's stake in Hutch-Essar through a deal in Cayman Islands in 2007. However, the tax order was quashed by the Supreme Court in January this year. Following the apex court's verdict, the government amended the I-T Act with retrospective effect to bring the Vodafone-type acquisition deals into the tax net.

Under Section 119 of the Finance Act, 2012, the initial order of the I-T Department in October, 2010, stands validated and a demand can be raised along with imposition of penalty of Rs.7,900 crore which was raised in April, 2011. However, the penalty demand was not enforced in view of a Supreme Court direction dated April 15, 2011.

On whether any instruction had been given to taxmen following the restrospective amendments with regard to indirect transfers of assets, Mr. Chidambaram said: “We have not given any instructions. Nothing will happen. Wherever there is litigation, litigation is there. Wherever replies have been given, replies will be considered. No special instruction has been given.”

On the issue of taxing non-resident transfers where the underlying asset is in India, the Finance Minister said the scope of the terms of reference of the Shome committee had been expanded to include all non-resident tax payers instead of only FIIs. “Dr. Shome has promised to look into it. So let us see what he has to say after comparing provisions with similar provisions in other jurisdictions,” he said.

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