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Open to out-of-court settlement of legacy tax issues, says Adhia

business Updated: Dec 28, 2015 00:35 IST
Retrospective Indian tax issues

Hasmukh Adhia, Financial Services secretary, has announced that the Centre is open to any proposal for out-of-court settlements of retrospective tax issues.(HT File Photo)

Keen to put an end to the overhang of legacy issues, the government is open to any proposal for an out-of-court settlement of retrospective tax issues like the ones facing Vodafone and Cairn Energy, revenue secretary Hasmukh Adhia has said.

British telecom giant Vodafone as well as Scottish explorer Cairn Energy have dragged the government to arbitration against tax demands raised after enacting a legislation that allowed tax to be levied retrospectively.

“The present government has made it very clear that there would be no more retrospective taxation,” Adhia said. “However, there are some legacy cases which arose because of retrospective amendment in the past which we are trying to settle within the existing legal framework.”

Asked if the government is open for an out-of-court settlement, Adhia said, “the government is open to any proposal of out-of-court settlement.”

Vodafone has been slapped with a tax demand of `7,990 crore, which together with interest and penalty comes to `20,000 crore, over its 2007 purchase of Hutchison Whampoa’s Indian assets.

Cairn Energy was issued a tax notice of `10,247 crore in January last year over alleged capital gains made after the transfer of its India business into a new subsidiary Cairn India and got it listed on stock exchanges in 2006.

Both firms have initiated arbitration against the tax demand.

Adhia, however, refused to comment on either of the cases. “I would not like to discuss any individual case.”

The Centre had in July appointed international lawyer Rodrigo Oreamuno to arbitrate on its behalf in the tax case with Vodafone. Costa Rica-based Oreamuno replaced former Chief Justice of India RC Lahoti who had in May recused himself. Vodafone has already named Yves Fortier of Canada as its nominee on the panel.

However, a third arbitrator, who will act as a chairman of the three-member tribunal for the case, has not yet been firmed up by Oreamuno and Fortier.

In the Cairn issue, the government initially refused to join the arbitration but last month named Singapore-based lawyer J Christopher Thomas as its arbitrator. Cairn has already named former Bulgarian minister Stanimir A Alexandrov as its arbitrator. A third arbitrator is yet to be named in the case.