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Govt to mull legal remedies in Vodafone's arbitration after studying verdict
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SME Times News Bureau | 25 Sep, 2020
The Centre will take a decision on further course of action including
legal remedies among other options after studying the award and
consulting with its counsels after Vodafone won the case against India
over a retrospective tax demand of more than Rs 20,000 crore The
Permanent Court of Arbitration (PCA) at The Hague.
The Permanent
Court of Arbitration (PCA) has ruled that the conduct of India's tax
department is in breach of "fair and equitable" treatment.
"The
Finance Ministry has said today that it has just been informed that the
award in the arbitration case invoked by Vodafone International Holding
BV against Government of India has been passed. The Government will be
studying the award and all its aspects carefully in consultation with
our counsels," it said.
"After such consultations, the Government
will consider all options and take a decision on further course of
action including legal remedies before appropriate fora," the Finance
Ministry statement said.
Vodafone had moved the International
Court of Justice (ICJ) in 2016 due to a lack of consensus between the
parties' arbitrators in finalising a judge for a tax dispute.
Following
this, a tribunal was constituted in June 2016 after Vodafone challenged
India's use of a 2012 legislation that gave it powers to
retrospectively tax deals like Vodafone's $11 billion acquisition of 67
per cent stake in Hutchison Whampoa in 2007. The retrospective tax law
had been enacted after a Supreme Court judgement went in Vodafone's
favour.
Vodafone had challenged the tax department's demand of Rs
7,990 crore as capital gains tax (Rs 22,100 crore after including
interest and penalty) under the Netherlands-India Bilateral Investment
Treaty (BIT).
In 2007, the Income Tax Department had slapped a demand notice seeking capital gains tax.
Established
in 1899 to facilitate arbitration and other forms of dispute resolution
between states, the PCA has developed into a modern, multi-faceted
arbitral institution perfectly situated to meet the evolving dispute
resolution needs of the international community.
In May 2018, the
Delhi High Court had allowed the second arbitration initiated by
Vodafone Plc. under the India-UK Bilateral Investment Protection
Agreement in the over Rs 20,000 crore retrospective tax case.
Justice
Manmohan, who was hearing the case in the high court, had said that the
Centre can approach the UK arbitration tribunal under the India-UK
Bilateral Investment Protection Agreement (BIPA) for its grievances.
Vodafone
had initiated two arbitrations against India, one under the
India-Netherlands BIPA and the other under the India-UK BIPA.
The
tax demand had been raised way back in 2007 by the Income Tax
Department. The then UPA government had raised a tax demand of Rs 11,000
crore on Vodafone's $11 billion acquisition of Hutchison Telecom stake.
In 2012, the Supreme Court quashed the demand. On its part, the government amended its law retrospectively.
Vodafone
maintained that there was no tax to be paid, and in 2014, it used the
BIT to challenge the demand. The two sides could not resolve the matter
in negotiations following which Vodafone served an arbitration notice.
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