Vodafone has filed an application with the Indian government to settle its tax dispute under the retrospective law, agreeing to indemnify it against any future claims, a top government official told ET.
“They have applied… After processing of the application, the company would be issued Form 2,” the official said. Form 2 is the next step that signals acceptance of the application, setting the stage for the issue of refund of tax paid.
The government has to refund ₹44.7 crore to Vodafone that it had collected as tax.
Other Firms Issued Form 2
Cairn Energy and all the other companies covered by the retrospective tax had already applied for settlement with the Income Tax department after the final rules under the Taxation Laws (Amendment) Act 2021 were issued. Their applications have been processed and most, including Cairn Energy, have been issued Form 2, the official said.
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.
The government has amended the Finance Act, 2012, and the Income Tax Act, 1961, thus scrapping the retrospective taxation clause that was introduced in May 2012.
Vodafone had acquired a controlling stake in Hutchison Essar in 2007 in an $11.2 billion deal executed overseas. India’s tax department had claimed that Vodafone should have withheld tax and issued a notice seeking ₹11,218 crore, later augmented by ₹7,900 crore in penalties.
In 2012, the government retrospectively amended the income tax law to tax offshore deals involving the transfer of Indian assets after the Supreme Court ruled in favour of Vodafone.
Vodafone sought arbitration under the India-Netherlands Bilateral Investment Promotion and Protection Agreement in 2014. The Permanent Court of Arbitration held that the retrospective legislation was in breach of the “guarantee of fair and equitable treatment”.