After several backroom maneuvers and mounting international pressure, Dutch subsidiary of UK’s Vodafone International Holdings BV (VIHBV) has finally taken out its cudgels to attack the Indian government over issue of retrospective tax amendment.
The British telecom major said on Tuesday it has shot off notice of dispute to the Indian government prior to initiating international investment treaty arbitration under the bilateral investment treaty (BIT) between Indian and the Kingdom of the Netherland.
“The notice has been delivered today to the prime minister, who sent a letter to Gordon Brown in February 2010 to assure him that Vodafone would have the full protection of the law and there was no retrospective application of taxation,” said the statement issued by Vodafone. The firm has locked horns with Indian government after it was serviced notice by the IT department to cough up Rs 11,000 crore taxes for its deal with Hutchison Essar Limited. And even though it won the legal battle with Supreme Court holding that it was not liable to pay taxes for the deal done on foreign shores, the government has pipped it by coming out with a proposal in the Finance Bill to retrospectively revise the IT Act 1962 that brings overseas deals such as Vodafone’s under tax net.
“If the legislation as drafted is made law, Vodafone will take whatever steps are necessary to protect our shareholders’ interests, which includes commencing an investment treaty arbitration against the government of India,” said the company.
The company said that under the BIT, the government was obliged to “accord fair and equitable treatment to investors and provide full protection and security.”
According to an agency report, commerce minister Anand Sharma, who was in London on Monday, clarified that the Indian government was unlikely to budge from its position on the Vodafone tax case.
