Vodafone saga: Telco gets fresh tax notice over Hutch-Vodafone deal

Even as the government is losing no opportunity to emphasise its commitment to a transparent and predictable tax regime, it’s epic seven year tussle with Vodafone is not showing any signs of losing steam. The income tax department is back in pursuit of the British telecom giant and has issued a fresh notice, four sources familiar with the development told ET NOW. ET NOW was the first to report the development.

“The revenue authorities have recently issued a notice against Vodafone International Holdings under section 148 of the Income Tax Act seeking re-assessment of tax returns for assessment year 09-10. Section 148 deals with income that has escaped assessment and the tax department is seeking additional revenue in this case. Though at this point, the relevant quantum and the trigger for the notice are unknown,” said one of the four sources cited above.

Under the Income Tax Act, Vodafone International Holdings has thirty days to respond to the fresh notice. “The company will have to file fresh tax returns and will then be able to demand an explanation from the revenue authorities on the rationale behind the proceedings under section 148 of the Income Tax Act. If the telco disagrees with the reasons furnished by the tax authorities, it has the option of challenging the notice by moving court, another source added. A Vodafone spokesperson decline to comment on a query from ET NOW on the development.

Vodafone and the Indian government have locked horns on the international stage after the company sought arbitration under the Bilateral Investment Protection and Promotion Agreement (BIPA) between India and the Netherlands to resolve the Rs 20,000 crore tax issue over the 2007 Hutch-Vodafone deal. Additionally, Vodafone India services private limited has moved the Bombay High Court challenging an order from the income tax appellate tribunal which ruled that revenue authorities had the jurisdiction to act against the company in a Rs 8,500 cr transfer pricing dispute.

Speaking at a recent event at the Peterson Institute for International Economics in Washington, Finance Minister Arun Jaitley said “I am acutely aware that there are concerns about retrospective taxation, tax harassment, unpredictability and arbitrariness on tax administration, especially relating to transfer pricing… Let me emphasize that we are absolutely committed to a transparent and predictable tax regime.There will be no retrospective actions and we will see taxpayers as partners not as potential hostages or victims”