InvestorQ : What happens now that the government has decided to appeal against the International Tribunal order in the Vodafone capital gains payment issue?
Dia Deshpande made post

What happens now that the government has decided to appeal against the International Tribunal order in the Vodafone capital gains payment issue?

Answer
image
5 months ago
Follow

Things are beginning to pick up steam in the retrospective case pertaining to the cases of Cairn Energy PLC and Vodafone PLC. In fact, a day after India got an adverse ruling on the Cairn PLC retrospective tax case; the government of India has gone ahead and challenged the international arbitration court's earlier Vodafone verdict in a Singapore forum.

Let us quickly look back at the Vodafone retrospective case which pertains to the 2007 sale of stake in Hutch India by Hutchison Whampoa of Hong Kong to Vodafone PLC of London. India had then made a tax claim of $2 billion from the Vodafone group but in September this year Vodafone had won the case against India.

In the Vodafone case verdict in September, the International Appeals Tribunal, Hague ruled that the tax demand was against the spirit of the Indo-UK bilateral treaty and hence not valid. At that time, IAT of Hague had given 90 days to appeal the verdict. The government had to complete their filling of any objection to that verdict before 31 December.

This decision of the Indian government to fight the case legally also assumes significance in the light of the fact that India also recently lost the $1.2 billion tax dispute against Cairn Energy. In the Cairn case, the government had withheld dividends, which it has now been asked to refund to the company along with interest for the intervening period.

In the case of Cairn PLC, the government of India had withheld dividends payable to Cairn PLC by Vedanta as well as one of its tax refunds pending the final verdict on the case. The retrospective tax case dates back to 2012 and is part of form versus substance debate. The form may be of a sale but it can be disputed if the sole intent is to avoid paying tax.

1 Views