In­dia asks Voda­fone to pay $2.1 bil­lion tax bill or it may face as­set seizures

The Pak Banker - - BUSINESS -

In­dia said it may seize Voda­fone Group Plc's as­sets in the coun­try if the com­pany doesn't pay a dis­puted 142-bil­lion-ru­pee ($2.1 bil­lion) tax bill that's still un­der­go­ing in­ter­na­tional ar­bi­tra­tion pro­ceed­ings, ac­cord­ing to a copy of the no­tice that was sent to the com­pany this month.

Anil Sant, deputy com­mis­sioner of in­come tax, in­formed the com­pany's Voda­fone In­ter­na­tional Hold­ings BV Dutch unit of its dues in a let­ter dated Feb. 4, ac­cord­ing to the docu- ment, a copy of which was seen by Bloomberg News. Spokesman Ben Padovan at Voda­fone and a rep­re­sen­ta­tive at In­dia's tax depart­ment de­clined to com­ment. Any over­due amounts, even from over­seas com­pa­nies, may be re­cov­ered "from any as­sets of the non-res­i­dent which are, or may at any time come, within In­dia," ac­cord­ing to the let­ter.

Voda­fone has been fight­ing In­dian tax au­thor­i­ties for years over its pur­chase of bil­lion­aire Li Kash­ing's mo­bile-phone busi­ness in the coun­try dur­ing 2007 in a case that an­a­lysts have said may in­flu­ence for­eign in­vestors' per­cep­tions about In­dia. "The tax au­thor­ity is not privy to ar­bi­tra­tion, and they will act against a com­pany to re­cover the dues owed to them," said Shardul J. Thacker, a part­ner at law firm Mulla & Mulla & Craigie Blunt & Caroe. "The tax au­thor­i­ties do have a lot of pow­ers and can seize as­sets and im­pose penal­ties on de­fault­ers."

Shares of Voda­fone fell as much as 0.6 per­cent in early Lon­don trad­ing and was among the worst per­form­ers in the FTSE 100 In­dex. It's not im­me­di­ately clear what the govern­ment's next steps would be if Voda­fone were to de­cline the pay­ment re­quest.

The dis­pute traces back to Voda­fone's $11 bil­lion ac­qui­si­tion of a 67 per­cent stake in the mo­bile­phone busi­ness owned by Hutchi­son Wham­poa, now part of CK Hutchi­son Hold­ings Ltd. While Voda­fone has said it doesn't owe the In­dian govern­ment money be­cause the trans­ac­tion was con­ducted off­shore, In­dian au­thor­i­ties have sought to col­lect taxes on the deal be­cause it in­volved the as­sets in the coun­try.

Voda­fone, the se­cond-largest mo­bile car­rier in In­dia, be­gan in­ter­na­tional ar­bi­tra­tion pro­ceed­ings on the tax bill in 2014. It's the big­gest of three dis­putes Voda­fone has had with In­dia's govern­ment un­der Prime Min­is­ter Naren­dra Modi's pre­de­ces­sor. The other dis­putes in­volved the val­u­a­tion of in­ter­na­tional trans­ac­tions -- a case that Voda­fone won at the Bom­bay High Court -- and a sep­a­rate rul­ing in Oc­to­ber, whereby the court ruled that Voda­fone didn't owe as much as 85 bil­lion ru­pees in back taxes.

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