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Vodafone transfer pricing case: It has nothing to do with retrospective tax, says FM Jaitley
April, 21st 2016

Defending move to appeal against the Bombay High Court verdict in the Rs 8,500-crore Vodafone transfer pricing case, Finance Minister Arun Jaitley on Wednesday said the case had nothing to do with retrospective tax issue and no company is immune from paying taxes.

"Why should the government not file an appeal when it thinks that it is an appealable order," he told ET Now. "There is no company in the world that is immune from paying taxes." Jaitley was responding to a question on the tax department deciding to challenge an October 8, 2015 decision of the Bombay High Court in the Supreme Court through a Special Leave Petition (SLP).

"There are important questions of law which go to the Supreme Court. This case has nothing to do with the retrospective tax issue," said Jaitley, who is here on a seven-day official tour.
Vodafone had got favourable verdicts from the Bombay High Court in two tax cases last year.

The first one pertained to the High Court rejecting tax authorities claim that Vodafone priced the shares of its stakes in its Indian companies sold to other arms of Vodafone in a way to avoid taxes. The Income Tax Department had sought Rs 3,000 crore in taxes.

In the second case, the High Court had on October 8 ruled that the Department did not have the jurisdiction on the sale of Vodafone's call centre business to Hutchison Whampoa Properties and assignment of call options to Vodafone International Holdings BV in 2007-08.

The Income Tax Department has decided to appeal against the second verdict. It has, however, decided not to appeal against the first case alongside a similar transfer-pricing case won by Royal Dutch Shell.
Besides the two cases, Vodafone is fighting a separate larger case relating to imposition of taxes using retrospective legislation over its 2007 acquisition of an Indian telecom group. The case is awaiting international arbitration.

"There can't be a principle that a company had once an issue of retrospective taxation, this company is immune from other forms of taxation. So If there are legitimate issues with regard to other areas, it is between the company and department to sort them out," Jaitley said on Vodafone case.

He said retrospective tax is an issue of the past.

"It is an issue which the previous government has created. It is an issue which we have resolved. For one or two cases which are pending, we have given several options of resolving these issues," he said.

The Minister was referring to his Budget proposal to waive interest and penalty if the companies involved in retrospective tax cases like Vodafone and Cairn Energy plc of UK paid the principal tax amount.

"We want a predictable tax regime. Therefore, the predictability of tax regime is ensured by not having retrospective taxation and that is the clear policy of the government," he said.

Investors, he said, are very clever people who understand the sea change that has taken place in India. "I don't have to smoothen any nerves, investors are very enthusiastic and bullish about India."

 
 
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