Retrospective law change may reverse Supreme Court order: Vodafone

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In the tax case, the Supreme Court ruled in favour of Vodafone in January after its five-year-long legal battle and last month, the court dismissed the government's review plea challenging the order...

In the tax case, the Supreme Court ruled in favour of Vodafone in January after its five-year-long legal battle and last month, the court dismissed the government's review plea challenging the order.

Vodafone, which has also got George Osborne, the British chancellor of exchequer to lobby for it, said the proposed legislation could reverse the court order. "The proposed legislation would also countermand the verdict of the Indian Supreme Court in January 2012, which ruled that Vodafone had no liability to account for withholding tax on its acquisition of indirect interests in Hutchison Essar Limited in 2007," the company said in a statement. In a filing to the London Stock Exchange, the Dutch subsidiary of the world's largest telecom operator (VIHBV) said that the dispute with the Indian government arises from the retrospective tax legislation proposed by it which, if enacted, would have serious consequences for a wide range of Indian and international businesses, as well as direct and negative consequences for Vodafone. VIHBV is a company constituted under the laws of the Netherlands and therefore an investor as defined under Article 1(d) of the treaty, the company said.

Finance secretary RS Gujral, however, refused to comment, saying the government had not received the papers yet. In private, finance ministry officials suggested that the dispute may not be covered by the India-Netherlands investment treaty.

There have been concerns over the impact of the move on the overall investment climate, a suggestion that the government has dismissed saying tax is one of the issues involved in the overall investment decision.

"The questions raised by Indian ministries cannot be unilaterally decided by India. They would have to be addressed to, and decided by, the arbitral tribunal if it came to that. As noted in our statement this morning, Vodafone would like an amicable outcome to this issue, if achievable," a statement issued on Tuesday evening said.