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Government to collect Rs 20,000 crore from Vodafone in tax dues, talks fail
11 Feb 2014, 09:34 PM IST 
- The finance ministry has, in a Cabinet note, detailed its plan to withdraw from the conciliation process with Vodafone, which was initiated last year.
- The law ministry has reportedly concurred. "The I-T department may proceed as per the provisions of the Income Tax Act to collect the outstanding demand from the company," the law ministry has reportedly said in its comment on the new Cabinet note.
- The note will now go to the Cabinet, which had in June last year approved the finance ministry's proposal to go in for conciliation with Vodafone to resolve the capital gains tax dispute related to its acquisition of Hong Kong- based company Hutchison's stake in its Indian mobile phone business in 2007.
- While the basic tax demand for the deal is of Rs 7,990 crore, outstanding dues, including a penalty and accrued interest, make it a Rs 20,000-crore bill. The revenue department, sources said, will now move to recover the entire amount.
- Sources said talks collapsed because Vodafone wanted to club a Rs 3,700-crore transfer-pricing case of Vodafone India Services with the capital gains tax issue, a demand that the Finance Ministry did not accept.
- The case was in the courts for many years, with the telecom major contending that it is not liable to pay tax as Indian tax authorities do not have jurisdiction over an overseas transfer of the kind it did in the deal.
- India's tax department argued that Vodafone should have deducted tax at source before paying Hutchison.
- In January 2012, the Supreme Court had ruled in the telecom major's favour, saying it is not liable to pay tax.
- But India amended a clause in the law to make retrospective tax claims in march 2012.
- In 2007, Vodafone paid $11 billion for the 67 per cent stake, and now owns 74 per cent of the Indian business, while the other 26 per cent is owned by Indian investors according to the country's law. PTI said Vodafone declined to comment on the issue.
(With inputs from PTI)