Days after reacting strongly to the Income Tax Department’s threat of seizing its assets if it did not pay up the disputed Rs 14,200 crore tax bill, British telecommunications group Vodafone plc on Thursday said it remains committed as long-term investor in India and that it enjoys a constructive relationship with the government.
The group had on Tuesday termed the reminder notice, which related to a 2007 issue that is under arbitration, as displaying a disconnect with Prime Minister Narendra Modi’s promise of a tax-friendly environment.
“Vodafone’s statement on Tuesday was made in response to questions from Indian and global media surprised - as we were - that the Indian Tax Department appeared to be threatening asset seizures in cases subject to international arbitration, and that this had been made public,” a company spokesperson said.
The February 4 tax reminder notice came as Modi as well as finance minister Arun Jaitley have been reiterating that the government will no longer push retrospective tax cases.
“Vodafone is a committed long-term investor in India, and in that regard enjoys a positive and constructive relationship with the Indian Government,” the spokesperson said today.
The company is understood to have not replied to the tax notice.
The I-Tax Department notice to Vodafone International Holdings BV was seeking Rs 14,200 crore in taxes, which it says were due from its $11 billion acquisition of Hutchison Whampoa’s India telecom business in 2007. The matter is currently under international arbitration.
The company on Tuesday had stated confirmed receiving “a tax reminder from the Tax Department that also references asset seizures in the event of non-payment.”
The tax demand relates to a dispute that is currently the subject of international arbitration, it had said.
The British telecom major has disputed the tax demand over its acquisition of 67% stake in Hutchison, now called Vodafone India, arguing that no tax was due as the transaction was conducted offshore.
But the tax department’s contention is capital gains were made on assets in India.
“The Indian government stated in 2014 that existing tax disputes, including ours, would be resolved through the existing judicial process,” Vodafone had said in the statement.
“In a week when Prime Minister Modi is promoting a tax-friendly environment for foreign investors - this seems a complete disconnect between the government and the tax department.”
The previous UPA government had introduced a retrospective amendment after the Vodafone group won its tax case in the Supreme Court.
The basic tax demand on Vodafone was Rs 7,990 crore, but the total outstanding is now much higher after including interest and penalty.