Vodafone Wins Rs 20,000 Crore Retrospective Tax Case Against India Govt In International Arbitration

The Vodafone Group has won an international arbitration case against the Indian government in a retrospective tax dispute of over Rs 20,000 crores, reported the Reuters.

The Permanent Court of Arbitration at the Hague ruled that the Indian government's tax demand on Vodafone is in breach of the investment treaty agreement between India and the Netherlands.

The issue relates to the tax demand of Rs 12,000 crore made by the Income Tax department from the international telecom giant with respect to its acquisition of the Indian assets of Hutchison Whampoa in 2007. The department contended that though the agreement between Vodafone and Hutch was executed outside India, since it related to assets in India, Vodafone was liable to make Tax Deduction at Source with respect to the consideration paid to Hutch.

While the Bombay High Court upheld the tax demand, the Supreme Court, in 2012, reversed that verdict and absolved Vodafone of the tax liability.

To overcome the verdict, the Central Government brought an amendment to the Income Tax Act later that year, with retrospective effect.

Following a fresh tax demand on the basis of the amended law, Vodafone moved the arbitration tribunal in 2014, invoking the India-Netherlands bilateral investment treaty of 2013.  

The tribunal, in its ruling, said the government must cease seeking the dues from Vodafone and should also pay over ₹ 40 crore to the company as partial compensation for its legal costs, reported the NDTV.

Incidentally, Vodafone-Idea owes the Department of Telecom dues to the tune of Rs 58,254 crore on account of the October 2019 verdict of the Supreme Court interpreting 'Adjusted Gross Revenue'(AGR) in the spectrum licensing agreement to inlcude revenue from non-telecom sources as well.

Recently, the Supreme Court allowed the telecom companies to pay off the AGR dues in a staggered fashion over 10 annual instalments.