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'All Options Being Examined': Finance Ministry Clarifies On Vodafone Arbitration Appeal

Finance Ministry has junked "speculative" reports that claimed the Attorney General of India was in favour of not appealing in the Vodafone arbitration award

Ministry of Finance

The Finance Ministry on Thursday junked "speculative" reports that claimed the Attorney General of India was in favour of not appealing in the high-profile Vodafone arbitration award case.

"A speculative news story being circulated in some section of media claiming that the Attorney General has given opinion in favour of not appealing in the Vodafone Arbitration award is totally incorrect and without any factual basis," the Ministry said in a statement. It also clarified that the award along with all options are under examination and based on that, further course of action will be decided.

Last month, an international arbitration court ruled that the Indian government seeking Rs 22,100 crore in taxes from telecom giant Vodafone using retrospective legislation was in "breach of the guarantee of fair and equitable treatment" guaranteed under the bilateral investment protection pact between India and the Netherlands. According to the award, the Indian government will reimburse Vodafone 4,327,294.50 pounds or its equivalent in US dollars, being 60% costs for legal representation and assistance, and 3,000 euros or its equivalent in US dollars, being 50% of the fees paid by Vodafone to the appointing authority.

Soon after, reports said the government is weighing its legal options after losing the case as it looked to limit damages not just in this matter but also in case of a separate lawsuit with Cairn Energy goes against it.

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India-Vodafone tussle

In 2013, the UPA-2 government had issued a tax demand of Rs 14,200 crore (including principal plus interest) to Vodafone, using a 2012 tax law, retrospectively taxing a 2007 deal between Vodafone and Hutchison Whampoa in 2007 worth $11 billion. Vodafone had challenged the notice under the Netherlands-India Bilateral Investment Treaty (BIT) in 2014, but could not resolve the dispute with the Centre.

Two years later, in 2016, the Modi government issued a tax notice demanding a payment of Rs 22,000 crores (including interest since the original notice), warning of asset confiscation if not paid. Vodafone then moved the International Court of Justice (ICJ) in 2016 after failing to reach a consensus with the Centre.

In 2007, the UPA-1 government had pulled up Vodafone alleging that it failed to deduct withholding tax in the Hutchison deal. Vodafone had acquired 65% of the mobile phone company Hutchinson, for which the Centre demanded a capital gains tax payment of Rs 7990 crores. When the telecom firm moved the Supreme Court in 2012, the apex court had moved in favour of the telco stating that the 'transaction in 2007 was not taxable in India as per the Income Tax Act 1961'.

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