Vodafone Group Plc on Friday, September 25 won the arbitration against India over retrospective tax demand of ₹20,000 crore.
The Permanent Court of Arbitration in The Hague ruled that the Indian government’s demand of ₹20,000 crore as retrospective tax was ‘in breach of the guarantee of fair and equitable treatment’, reported NDTV.
The court has also asked the Indian government to refund ₹40.3 crores to Vodafone Group for legal representation, assistance, and for fees paid by the company to the arbitration court.
‘The respondent’s (India’s) conduct in respect of the imposition on the claimant (Vodafone Group) of an asserted liability to tax notwithstanding the Supreme Court judgment is in breach of the guarantee of fair and equitable treatment,’ the tribunal ruled.
In 2007, the Indian I-T department issued a demand notice seeking capital gains tax in Vodafone’s Hutchison deal. After two years, In 2009, the tax demand was raised by the then government with relation to the company’s $11 billion acquisition of 67 percent of Hutchison Telecom stake.
The total demand against Vodafone Group after adding the interest and penalty imposed on the company was ₹20,000 crore.
The telecom giant challenged the claim, saying that it would not have to pay the said capital gains tax since India and the Netherlands had a bilateral investment treaty (BIT).
Though the company also challenged the tax demand in the Supreme Court, which had ruled in their favor, however, the government amended the finance act in 2012 and applied the tax retrospectively.
Later in 2016, the company received a notice of an outstanding tax demand, along with a threat to confiscate Indian assets if the tax is not paid, the media reported.
The telecom major then moved to the International Court of Justice (ICJ) in 2016, after both the parties failed to finalize the judge for the ongoing tax dispute.
