Tax office opens new front in dispute with Vodafone

20 Apr 2015

The Indian government has issued fresh notices to Vodafone India seeking reassessment of tax returns for the year 2009-2010, the Economic Times reports, citing a source familiar with the matter. The notice was issued under section 148 of the Income Tax Act, one source noted, explaining that the section ‘deals with income tax that has escaped assessment,’ adding that: ‘At this point, the relevant quantum and the trigger for the notice are unknown.’

New Delhi’s dealing with Vodafone is at odds with the current government’s efforts to shed India’s poor reputation for employing ‘tax terrorism’ – the sudden levying of huge, retrospective tax bills on major companies, and aggressively pursuing those claims. Indeed, the office’s notice follows comments from finance minister Arun Jaitley that the ministry is ‘committed to a transparent and predictable tax regime. There will be no retrospective actions and we will see taxpayers as partners, not as potential hostages or victims.’ In his statement, the official admitted that there were ‘concerns about retrospective taxation, tax harassment, unpredictability and arbitrariness on tax administration, especially relating to transfer pricing.’

According to TeleGeography’s GlobalComms Database,Vodafone and the Indian tax office have been locked in a bitter dispute in recent years, with the government claiming it is owed USD2 billion in unpaid taxes relating to the UK group’s USD11 billion purchase of the cellco in 2007 from Hutchison Whampoa. Whilst Vodafone was cleared of any liability in 2012 by the Supreme Court, the government introduced new legislation later that year that would enable it to tax the company retrospectively. The issue remains unresolved, with the two sides currently negotiating over arbitration proceedings. Elsewhere, Vodafone was hit by another order for INR85 billion (USD1.37 billion) last year in relation to a transfer pricing dispute and the cellco is now tussling with the tax office over its jurisdiction to act against the company.

India, Vodafone India