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Government not to coerce Vodafone, Cairn on retro tax case
March, 29th 2016

The government will not "coerce" companies like Vodafone Group and Cairn Energy to avail of its one-time offer to settle their retrospective tax cases and it was for them to take a call on it, Finance Minister Arun Jaitley said today.

The option before such companies was either to accept the offer of paying principal tax amount and get waiver from interest and penalty, or continue litigation, he said during an interaction with journalists at the PTI office here.

"This is an alternate route which I have suggested. The option is theirs. Nobody is being coerced to accept one route or the other," he said.

The government, he said, has no issues with companies not wanting to accept the offer and continue litigation. "If they want to continue with the litigation, so be it... the outcome of the litigation will determine (the fate of tax demand)."

Asked about the tax notices sent to Vodafone and Cairn last month despite the issue being under arbitration and government commitment not to create fresh demand using retrospective tax law, Jaitley said notice would go if there are pre-existing assessment orders.

"You must accept one thing. That if there are pre- existing assessment orders in existence, obviously notices will go for those, unless those notices are stayed or stuck down.

"And if the concerned officer doesn't even issue the notice, tomorrow some CAG or CBI will ask him why did he keep sitting on the file? Sending notices and enforcement of notice are two different things," he said.

UK oil explorer Cairn Energy is facing a tax demand of Rs 10,247 crore on alleged capital gains made in a 2006 business reorganisation it carried out in its India unit before getting it listed. The total tax due after including interest comes over Rs 29,000 crore.

British telecom giant Vodafone is also facing a total of Rs 14,200 crore in tax, interest and penalty over its $11-billion acquisition of 67 per cent stake in the mobile- phone business owned by Hutchison Whampoa in 2007.

Both the firms have disputed any tax was due and challenged the demands by initiating international arbitration.

The retrospective tax scheme is to open on June 1 and companies availing of it must provide a proof of withdrawal of all legal proceedings including arbitration.

Jaitley said he had in his Budget for 2016-17 proposed four different schemes to "clean up" past tax issues.

The first scheme pertains to any direct tax that may have escaped assessment, "I have offered a settlement by payment of tax and some penalty," he said.

"I have offered the same for where first appeals are pending. Where appeals are pending, pay tax plus interest as of assessment order and be done with. The same facility I have then given for service tax, excise duty and customs, in addition to the Income Tax Act," he said.

The fourth scheme pertains to those who faced any form of retrospective taxation. They can "pay just the principal and get away with it."

"So, these are four different ideas that I have given. So therefore in order to clean up your taxation, these can be of considerable help to people who want to use this," he said.

Sources said the government was of the view that the arbitrations are not just time consuming but were also costing the government a lot besides getting India a bad name.

The settlement scheme was proposed to put an end to all of it.

"In order to give an opportunity to the past cases which are ongoing under the retrospective amendment, I propose a one-time scheme of Dispute Resolution for them," Jaitley had said while presenting the Budget in Parliament on February 29.

He had then stated that "they can settle the case by paying only the tax arrears, in which case liability of the interest and penalty shall be waived."

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