‘Vivad se Vishwas an option to resolve Cairn, Voda disputes’

NEW DELHI: The ongoing tax amnesty scheme, Vivad se Vishwas, is a viable option within the legal framework to amicably resolve retrospective tax litigation between the Indian government and two companies—cairn Energy Plc and Vodafone Group Plc—that together involve a sum of over ₹30,000 crore, including interest and penalties, people aware of the development said.

It offers an ideal solution for both the Indian government and the two companies to settle the vexed issue quickly, at least four people said, requesting anonymity. Citing a clause in the scheme, two persons said Vivad Se Vishwas could reduce total tax liabilities of Cairn and Vodafone by up to 50% apart from waiving interest and penalties. According to the Income-tax Department’s website, the particular clause says: “If an issue in taxpayer’s pending appeal already decided in favor of taxpayer by higher appellate forum or if [Incometax] Department has filed appeal, amount payable is 50% of aforesaid amounts.”

A third person, however, disagreed on the matter. He said the clause was applicable for cases heard in domestic appellate forums only and not international tribunals. A fourth person said: “It would depend on interpretation of the law, and government could make some special dispensation in order to resolve the two cases which are lingering on for about a decade.”

“According to the scheme, the issues have already decided in favour of assessee [Cairn and Vodafone]. The income-tax department has already appealed in the case of Vodafone and has decided to appeal against the tribunal’s verdict on Cairn. Hence, this scheme is available to the firms, and accordingly the tax amount payable in both cases could be reduced by 50%,” the fourth person added. The first person mentioned above said the Centre and companies may discuss possible solutions to the disputes. “Vivad se Vishwas is one such solution, which is expected to be discussed when senior executives of Cairn will meet with government officials this week. Else, Indian authorities are legally bound to contest verdicts of the foreign tribunals as per the law of the land as no investment treaties impinge upon the sovereign’s taxation rights,” he said.

Vodafone Group and the finance ministry did not respond to email queries on this matter. Cairn Energy offered no comment.

Abhishek A Rastogi, a partner at law firm Khaitan & Co., said: “The ongoing tax amnesty scheme is a pragmatic option to amicably resolve retrospective tax litigation between the Indian government and two separate companies i.e. Cairn Energy Plc and Vodafone Plc. In fact, the scheme could be completely customised to address retrospective amendments and bilateral investment treaties. The resolution will be beneficial to both taxpayers from savings perspective and to the government from the global perception perspective.”