The government has sought the views of its top law officer — the Attorney General — on the legal viability of hammering out an out-of-court settlement with British telecom giant Vodafone on its Rs. 11,200-crore tax dispute.
This follows a difference of opinion between the finance and law
ministries over the move with the latter holding the view that it may not be appropriate to reconcile the matter out-of-court given the changes that were introduced in the Finance Act in 2012.
The finance ministry under Pranab Mukherjee had introduced changes in India’s tax laws to impose a retrospective provision for tax on some types of global mergers including Vodafone’s 2007 acquisition of Hutchinson’s mobile assets in India.
This was widely seen as a fallout of Vodafone’s five-year court battle over the R11,200-crore tax demand, with the government arguing that the British firm had concluded the Hutchison deal abroad — in the Cayman Islands — to evade taxes.
Vodafone contested it on the basis that no tax was due in any event as the deal was concluded in Cayman Islands.
The finance ministry, it is learnt, is not averse to waive off the interest component on the tax demand that will reduce Vodafone’s liabilities substantially.
A final decision will be taken by the Cabinet that will discuss the Attorney General’s views on the matter.
“The draft Cabinet note had sought our opinion on whether this matter can be settled through conciliation. Our view, so far, is that it is not permissible without appropriate amendments in the Act,” a senior law ministry official said.
A top government official confirmed that the government has received a reconciliation proposal from the company.
“They (Vodafone) have written to us proposing conciliation. The government has replied saying that an appropriate authority will examine the request,” the official said, requesting anonymity.