Vodafone conciliation only after settlement of transfer pricing row

This may mean that the UK-based telecom firm’s case would be resolved only by the new government because the ITAT is scheduled to begin hearing of the transfer pricing case from March 19 and it may be weeks before a decision on the case is arrived at.

Earlier during the month, the government had decided to withdraw the conciliation offer after Vodafone insisted on clubbing its Rs 8,500-crore transfer pricing case with the capital gains tax case. The offer was approved by the Cabinet in June last year for resolving the dispute. Invoking Bilateral Investment Promotion and Protection Agreement between India and the Netherlands, Vodafone International Holdings BV had sent notice to the government regarding the long-pending dispute.

Later, it sent a supplementary notice for bringing the transfer pricing case under BIPA, a development that forced the government to consider withdrawal of the offer. The finance ministry has also prepared the reply to the BIPA notice, saying the pact between India and the Netherlands does not cover taxation issues.

“The Cabinet has decided not to take any hasty decision regarding review of conciliation talks with Vodafone,” the official said.

The firm has been battling with the I-T department on the capital gains tax relating to its acquisition of Hutchison Whampoa’s stake in Hutchison Essar in 2007. Though the tax demand in the case was Rs 7,990 crore, after accounting for penalty and accrued interest, the total amount escalated to Rs 20,000 crore.

After the Supreme Court in 2012 ruled that the I-T department had no jurisdiction over the deal, the government, in a bid to recover the tax, amended the law retrospectively in Budget FY13.

In December 2013, Vodafone had suggested that its transfer pricing case before the Income Tax Appellate Tribunal (ITAT) should be clubbed with the 2007 dispute.