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Vodafone Confirms Filing for Retro Tax Dispute Settlement

Vodafone Group has filed an application with the government to settle its Rs. 20,000-crore retrospective tax dispute. This is a significant step towards resolving its long-standing issue, as both parties had been at logger-heads in local and international courts.

“We can confirm we have filed an application. We have always been confident that no tax liability arose in respect of our acquisition of the Indian business, and this was borne out by the decisions of the Supreme Courts of India and the International Courts of Arbitration,” the UK-based telecom company said in a statement, its first with respect to the matter.

ET reported on December 3 that the telco had filed the application, indicating an end to the simmering retrospective tax battle.

After the application is processed, the company will be issued Form 2, the next step signaling acceptance of the application and setting the stage for the issue of refund of tax already paid.

In Vodafone’s case, the government will refund Rs. 44.7 crore since the company had not paid any tax on the demand raised by tax authorities, which comes to Rs. 22,100 crores in taxes, interest and penalties.

Vodafone has filed the application under a separate set of provisions.

The government issued these in mid-October under Section 119 of the Finance Act. There was a thaw in the long-pending dispute after the government amended its income tax laws to repeal retrospective taxation on offshore deals involving Indian assets before May 28, 2012.

The government has promised to refund taxes already collected and withdraw all litigation and arbitration. In return, companies will have to give an undertaking that they will withdraw litigation at all forums, and will forgo any damages, interest or other costs. Companies will also have to forego any future claims.

Vodafone’s tussle began when it acquired a controlling stake in Hutchison Essar in 2007 in a $11.2 billion deal executed overseas. The tax department claimed that Vodafone should have withheld tax and issued a notice seeking Rs. 11,218 crores, later augmented by Rs. 7,900 crores in penalties.

Vodafone Group – the parent entity of Vodafone Idea – owns 44.39% stake in India’s third largest telco. Besides Vodafone, Cairn Energy was one of the companies also impacted by the retrospective tax case. Cairn has already applied for settlement with the income tax department after the final rules under the taxation laws (Amendment) Act 2021 were issued. S-ET

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