Vodafone liable to pay tax: Attorney General

British telecom giant Vodafone should be asked to pay around Rs 11,000 crore in taxes it owes to the government following its takeover of Hutchinson, according to Attorney General GE Vahanvati. HT reports

British telecom giant Vodafone should be asked to pay around Rs 11,000 crore in taxes it owes to the government following its takeover of Hutchinson, according to the government’s top law officer, Attorney General GE Vahanvati.

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In his opinion, sought by the finance ministry on the high-profile issue, Vahanvati has stated that the January 20 Supreme Court judgment in favour of Vodafone should not come in the way of government implementing the Income Tax Act.

In his budget speech, former finance minister Pranab Mukherjee had stated that changes would be made in the Income Tax Act, 1961, to allow the government to impose taxes on foreign companies who had purchased Indian entities and this would apply to transactions done in the past also.

The Attorney General has opined that it is “obligatory” on companies to pay taxes in accordance with the Indian law. “It may be collected in accordance with the IT Act notwithstanding any judgment or order of any court,” Vahanvati stated.

This, along with uncertainty over general anti-avoidance rule (GAAR), has sparked fears among investors, who say this would choke foreign capital inflow into India. In January, the Supreme Court had ruled that Vodafone was not liable to pay any taxes under prevailing laws.

Shortly after taking over the new finance minister, P Chidambaram had said the government was open to a review of the controversial legislation. A clarification on tax laws including the retrospective tax law was on the cards.