The government is likely to bring to Cabinet a proposal this week to hammer out an out-of-court settlement with British telecom giant Vodafone on its six-year-old Rs 11,200-crore tax dispute.
The law ministry has endorsed the finance ministry’s proposal to settle the row.
Last year, the government approved changes in 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 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 waiving off the interest component on the tax demand that will reduce Vodafone’s liabilities substantially.
A top government official confirmed that the government has received a reconciliation proposal from the company.
The Parthasarathi Shome Committee, which was set up in July last year to frame a roadmap on tax avoidance proposals, has also favoured doing away with imposing taxes on corporate deals retrospectively.