The I-T department in India has asked Vodafone to pay up tax dues worth £1.42 billion or face action like the seizure of its assets. The UK firm has described this move as a disconnect with Prime Minister Narendra Modi's promise of a tax-friendly environment.
The department on February 4 sent a notice to Vodafone International Holdings BV seeking taxes dues, which it says are due from its $11 billion acquisition of Hutchison Whampoa's India telecom business in 2007. The matter is under international arbitration.
"We can confirm that we have received a tax reminder from the Tax Department that also references asset seizures in the event of non-payment," a Vodafone spokesperson said. The British telecom major has disputed the tax demand over its acquisition of 67% stake in Hutchison, now called Vodafone India, arguing that no tax was due as the transaction was conducted offshore.
But the tax department's contention is capital gains were made on assets in India. "The Indian government stated in 2014 that existing tax disputes, including ours, would be resolved through the existing judicial process," Vodafone said in the statement.
The company also made a reference to the promise made by Modi at Make-in-India event in Mumbai on Saturday. "In a week when Prime Minister Modi is promoting a tax-friendly environment for foreign investors - this seems a complete disconnect between the government and the tax department," Vodafone said.
The Vodafone case relates to the retrospective amendment of the I-T laws carried out by the UPA government in 2012 to overturn the Supreme Court verdict, which had favoured Vodafone. The basic tax demand for Vodafone was £799 million, but the total outstanding, including interest and penalty, is estimated to have risen to £2 billion.
Vodafone says Income Tax Department issues notice seeking £1.42 billion in tax despite the matter under arbitration.
