It looks like Vodafone’s tussle with the Indian government is far from over. The British telecom operator has today announced that it has served the Indian Government a ‘Notice of Dispute’ regarding India’s proposal to retrospectively tax overseas business deals which was introduced by India’s finance minister Pranab Mukherjee during the Union Budget 2012, last month.
The notice which was served by group’s Dutch subsidiary Vodafone International Holdings BV (VIHBV), states that if the retrospective tax bill was passed as a legislation, it could pose serious consequences for Vodafone as well as other Indian and international businesses and would amount to a breach of the Indian government’s obligations under the Bilateral Investment Treaty (BIT) between India and the Netherlands which mandates the government to provide fair treatment to investors.
In a press statement, Vodafone asked the Indian government to either drop the retrospective aspects of the proposed tax legislation or suitably to amend it so as to reach an amicable solution with them, failing which Vodafone will take necessary steps to protect its shareholders’ interests, which includes initiating an investment treaty arbitration case under the BIT against the Indian government.
Earlier this month, reports had indicated that the India’s Income Tax Department is about to issue a ‘demand notice’ to Vodafone, showing the government’s intentions to continue pursuing the tax case. It had stated that a clause in the Finance Bill, known as the validation clause, will be used to revive tax claims which were previously rejected by the Supreme Court earlier this year and the notice will be sent to Vodafone, following the passing of Finance Bill in Indian parliament which is expected to happen in early May 2012.