In a case against the Indian government, the Vodafone Group has won an international arbitration case involving a retrospective tax dispute amounting to Rs 20,000 crore.
The telecommunications company had contended that the tax liability it was subjected to through retrospective amendments to the income tax law was in violation of principles of equitable and fair treatment under India-Netherlands investment treaty agreement, as per a report by The Quint.
The tribunal accepting the contention ruled in Vodafone’s favour. Addtionally, the case allegedly involved Rs 12,000 crore in interest and Rs 7,900 crore in penalties.
To break down in simple terms, what Vodafone had challenged was the Indian government’s use of a 2012 legislation. This gave it powers to retrospectively tax deals like the telecom company’s $11 billion acquisition of a 67% stake in Hutchison Whampoa in 2007.
Additionally, this ruling also comes just days after the Supreme Court allowed a period of 10 years for telecom companies to clear adjusted gross revenue (AGR)-related dues on September 1. According to the ruling 10% of the dues will also have to be paid by March 31 2021.
The extension was granted in view of the COVID-19 situation, the court had added. It said, “Instalments to be paid by 7 February of every succeeding year. Any default will accrue interest and non-payment will also invite contempt of court proceedings.”
After all said and done this development comes as a relief for Vodafone Idea Ltd. As their survival would have become a cause of concern had the court not agreed to a staggered payment schedule.
(With added inputs from The Quint)
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