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Vodafone begins arbitration against India in tax dispute

HT Correspondent, Hindustan Times  New Delhi, May 07, 2014
First Published: 21:56 IST(7/5/2014) | Last Updated: 23:59 IST(7/5/2014)

British telecom giant Vodafone has served an arbitration notice on the Indian government over its Rs. 20,000-crore tax dispute.

"Vodafone confirms that Vodafone International Holdings BV has commenced an international investment arbitration against the Indian government under the Bilateral Investment Treaty (BIT) between India and the Netherlands," the company said in an email response to HT.

It has given two months time for a response, which means the new government will have to take a call on the arbitration demand.

Vodafone is locked in twin tax disputes with the government. One pertains to its 2007 acquisition of Hutchison Essar’s mobile assets and the other is the transfer-pricing case involving Vodafone India Services.

In 2012, the Supreme Court ruled in favour of Vodafone, saying the company was not liable to pay any tax on the deal. The government later made changes to retrospective tax rules, enabling it to tax already-concluded deals. 

"Since Vodafone and the Indian government have been unable to find an amicable means of resolving the dispute, Vodafone has commenced an international investment arbitration as a way to achieve resolution," a company spokesperson said.

Company sources said it is likely to seek international arbitration in London. The company did not say whether court cases would impact operations in India.

Earlier this year, the finance ministry circulated a draft Cabinet note seeking to withdraw the conciliation talks on the tax dispute.

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