CBDT informs Vodafone on agreeing to non-binding conciliation

The Central Board of Direct Taxes (CBDT) has formally written to British telecom major Vodafone, agreeing to enter into a non-binding conciliation to resolve the long-standing tax dispute.

"The Income-Tax Department has written to Vodafone, agreeing to enter into a non-binding conciliation to resolve the long-standing tax dispute" said a senior CBDT official.

Both sides will soon appoint representatives to carry out the negotiations, he said further.

Seeking to resolve the long-standing tax dispute with Vodafone, the Cabinet earlier this month had approved a proposal for non-binding conciliation with the British telecom major, the outcome of which will ultimately be vetted by Parliament.

"We (have) accepted the offer of Vodafone to enter into a non-binding conciliation. The outcome of the non-binding conciliation will be brought back to the Cabinet.

"If both sides (Vodafone and the government) agree on the outcome of the non-binding conciliation then the matter will be taken to Parliament by an amendment to the Income Tax Act," Finance Minister P Chidambaram had said.

The Minister had added that no timeframe has been set for conclusion of the conciliation proceeding.

The conciliation will be under the Indian arbitration law and not under the United Nations Commission on International Trade Law (UNCITRAL) as sought by Vodafone.

Vodafone is facing the tax liability of over Rs 11,217 crore for purchase of Hong Kong-based Hutchison Whampoa's stake in Indian telecom business Hutchison Essar in 2007.

Although the UK-based giant had won the tax case in the Supreme Court (January 2012), the government had last year amended the Income-tax Act, 1961 with retrospective effect to undo the ruling.

Following that, the Income Tax Department had issued a letter in January to Vodafone International Holdings BV stating that the company is required to pay tax demand of about Rs 11,217 crore along with interest.

However, Vodafone replied saying that they do not owe anything to the Indian Government. Vodafone earlier wanted to take India to international arbitration but later offered conciliation on the issue.