NAMO Continuing “Tax Terrorism” Despite Solemn Promise To The Contrary: Vodafone

The controversy relating to the taxability of the capital gains arising to Hutchison Whampoa out of the $11 billion acquisition by Vodafone has returned to haunt Vodafone. It may be recalled that the Supreme Court decided the issue in favour of Vodafone (341 ITR 1). However, a controversial retrospective amendment to section 9 of the Income-tax Act, 1961 sought to torpedo the judgement of the Supreme Court. Thereafter, the new Government led by Prime Minister Narendra Modi and Finance Minister Arun Jaitley declared that they are opposed to the concept of retrospective legislation and vowed to resolve the controversy. The amount owed by Vodafone on the basis of the retrospective legislation is Rs. 14,200 crore.

According to Mint, Anil Sant, Deputy Commissioner of Income-tax, has sent Vodafone a notice dated 4th February 2016 demanding that the said amount of Rs. 14,200 be paid. The notice makes it clear that the arrears can be recovered by attaching the assets of the non-resident assessee, Mint reported.

Obviously, the move has not go down well with Vodafone. It released a statement pointing out that “The Indian government stated in 2014 that existing tax disputes, including ours, would be resolved through existing judicial process. In a week when Prime Minister Modi is promoting a tax-friendly environment for foreign investors this seems a complete disconnect between government and the Tax Department.

The commentary from foreign observers has also been scathing. Tim Worstall wrote a scathing criticism in the Forbes:

“Just as the Modi government is trying to launch the Make in India campaign we’ve got the tax department trying, again, a tactic which will have foreign investors running for the hills. The government simply has to rein in that tax department, tell it that it lost the case in the Supreme Court and that that’s that. Because if there’s one thing that is going to stop foreign investment it’s the idea that the bureaucracy does not feel itself burdened by having to obey the law.

What’s worse in this case is that it is already in front of an arbitration tribunal: but the tax department is threatening to confiscate Vodafone’s local assets before that ruling is issued, before the case is even fully heard. This, on top of the previous Supreme Court ruling, just makes a mockery of the aim of having foreign investment into production and manufacturing in India.”

So, it looks, at least from the perspective of foreign investors, that the dreaded “tax terrorism” which was prevalent during the regime of former Finance Ministers Pranab Mukherjee and P. Chidamabaram is still very much a part of the culture even in the present regime.


8 comments on “NAMO Continuing “Tax Terrorism” Despite Solemn Promise To The Contrary: Vodafone
  1. Bobjee kurien says:

    It is highttime CBDT FIXES TIME SCHEDULE FOR ITSELF.AND TAKES DECISIONIN A HUMANE MANNER.IT SHOULD ALSO PAVE THE WAVE WHERE IT IS SEEN TO FOLLOW THE LAW OF THE LAND AND NOT SEEN AS A VIOLATOR OF THE DECISION GICEN BY THE HIGHEST COURT OF THE LAND.

  2. BOBJEE KURIEN says:

    The government simply has to rein in that tax department, tell it that it lost the case in the Supreme Court and that that’s that. Because if there’s one thing that is going to stop foreign investment it’s the idea that the bureaucracy does not feel itself burdened by having to obey the law.W hen this is the case whee the supreme court has already decided on the case this will be a clear case where the supreme court decision is violated and the officers have to be proceeded against for for contempt .

    • Varaprasad Daitha says:

      It is the bureaucracy which always ignores the verdicts of courts including Supreme Court. Probably they think people might not venture for contempt petitions because of economic reasons etc. If not why the CBDT does not follow the Supreme Court in the matters of disciplinary proceedings including those which were hosted on its website itself? The bureaucracy except a few like our Revenue Secretary do not care to accept the verdicts of High Courts and Supreme Court.

  3. Gopal kamal says:

    Vodafone has disputes in other jurisdictions too.
    Once interst is being negotiated for waiver, they are complacent about arbitration

  4. Gopal kamal says:

    How lOng should one wait for negotiations ?
    Splly when interest waiver is being negotiated!
    Does Vodafone dispute in other jurisdictions as well,records show.

  5. Varaprasad Daitha says:

    This is a clear indication that the ideas of PM Modi are not being transformed into action. There is a system of Dossiers where the arrears were in excess of certain amount the arrears were to be sent in the form of dossiers to that authority. Since in this case the arrears appear to be Rs. 14,200 crore the dossiers would be submitted to the CBDT. In such a case why did not the CBDT take into consideration of Supreme Court judgment? Why the CBDT had issued instructions to the assessing officer to proceed with collection process? When the arrears were of top order, the recovery were to be enforced by TRO and why the assessing officer had issued the recovery notices? All is under cover and not explicit. Who should be made accountable?

  6. BOBJEE KURIEN says:

    Now it is all to see . There is a complete disconnect between the assessee the Prime Minister the CBDT the assessing officer . In respect to the direction of the CBDT that all rectification orders need to be passed with in a specific time frameS and the REACTION AT THE GRASS ROOT IS APPALLING. tHE ASSESSING OFFICER WRITES BACK THAT THE MODIFICATION ORDERS WILL BE PASSED IN THE MONTH OF APRIL 2016!!!!!! THAT IS THE AUTHORITY THAT THE CBDT WIELDS . HAHAHAHA. AND THE PROMISE OF THE PRIME MINISTER GOES UP IN SMOKE.IS THIS SOME SORT OF CIRCUS

    • The intentions have to be clear. Bombay HC judgement on the subject by Lord Justice DY Chandrachud has very lucidly and eruditely established the business connection with India and hence the income is deemed to accrue and arise in India.

      The SC judgement is debatable. The parties have tried to evade which is being caught.

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