India has challenged an international arbitration court’s verdict against it over the Rs 20,000 crore tax claim involving the Vodafone group, Reuters reported on Thursday, citing government officials who refused to be identified.
The appeal has been filed at the Singapore seat of Permanent Court of Arbitration, according to The Indian Express.
The matter pertains to a ruling in September by the international arbitration tribunal in The Hague, which said that the Indian government’s imposition of a tax liability of over Rs 20,000 crore, including interest and penalties on Vodafone, breached the India-Netherlands Bilateral Investment Treaty. The tribunal had also directed the Indian government to pay Vodafone Rs 40 crore as partial compensation for its legal costs.
India had a window of 90 days, scheduled to end on December 24, to file an appeal against the verdict.
The decision to challenge the verdict was taken on Wednesday night following a meeting between “top ranking officers” and officials from the department of telecommunication and finance ministry, according to The Indian Express.
Meanwhile, on Tuesday, British oil and gas exploration company Cairn Energy also won an arbitration case against the Indian government over tax demands of Rs 10,247 crore. In a statement, the finance ministry said that government will consider all options, including legal remedies before taking further action on the matter.
Apart from Vodafone and Cairn Energy, India is also facing a string of arbitrations by investors like Deutsche Telekom and Nissan Motor over issues ranging from retrospective taxation to payment disputes, Reuters reported.
Vodafone tax dispute case
The tax dispute involving Rs 12,000 crore in interest and Rs 7,900 crore in penalties began after Vodafone’s acquisition of the Indian mobile assets from Hutchison Whampoa in 2007. The Indian government insisted that Vodafone pay taxes on the acquisition, which the company refused.
In 2012, the Supreme Court of India ruled in favour of Vodafone. However, the government changed the rules to enable it to tax agreements that had already been concluded. Subsequently, in 2014, Vodafone initiated arbitration proceedings against India. Vodafone contended that the demand for paying taxes violated the principles of equitable and fair treatment under the India-Netherlands treaty.
However, some telecom companies including Vodafone owe adjusted gross revenue dues to the government. The Supreme Court of India on September 1 gave telecommunications companies 10 years to pay adjusted gross revenue dues. Justice Arun Mishra said that the telecom firms must pay the dues in annual installments commencing from April 1, 2021, till March 31, 2031. The firms must also keep alive the adjusting bank guarantees until the payments are made.
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