Voda arbitration case moved to S’pore court
NEW DELHI: The government’s appeal against a verdict of an international arbitration tribunal that overturned its demand for ₹22,100 crore in back taxes from Vodafone Group Plc has been transferred to a senior court in Singapore and hearings are scheduled in September, sources said.
An international arbitration court had on September 25 last year rejected tax authorities’ demand for ₹22,100 crore in back taxes and penalties relating to the British telecom giant’s 2007 acquisition of an Indian operator.
The government in December applied in Singapore to set aside the award primarily on jurisdictional grounds. The proceedings have been transferred to a senior court, with a hearing date set for September, two sources with knowledge of the matter said.
The appeal was filed in the Singapore court as the Southeast Asian nation was the seat of arbitration.
The government has similarly challenged the order of a threemember tribunal at the Permanent Court of Arbitration in The Hague that asked India to return $1.2 billion, plus interest and cost, to British oil and gas company Cairn Energy plc.
The government had used a 2012 law, that gave tax authorities the power to reopen past cases, to seek taxes from Vodafone and Cairn over alleged capital gains made several years ago.
Both Vodafone and Cairn had challenged the tax demands under bilateral investment protection treaties and initiated the arbitration. India lost both cases.
Sources said the government believes that taxation is not covered under investment protection treaties with various countries and the law on taxation is a sovereign right of the country.
While the treaties are primarily aimed at protection of investments, the tax is levied on “returns” earned by entities.
The 2012 law, commonly referred as retrospective tax law, was enacted after the Supreme Court in January that year rejected proceedings brought by tax authorities against Vodafone International Holdings BV for its failure to deduct withholding tax from $11.1 billion paid to the Hutchison Telecommunications in 2007 for buying out its 67% stake in a wholly-owned Cayman Island incorporated subsidiary that indirectly held interests in Vodafone India Ltd.
The Finance Act 2012, which amended various provisions of the Income Tax Act 1961 with retrospective effect, contained provisions intended to tax any gain on transfer of shares in a non-Indian company, which derives substantial value from underlying Indian assets, such as Vodaone’s transaction with Hutchison in 2007.