Harish Salve, senior advocate, Supreme Court says that it is not accurate to state that Vodafone approached for conciliation. "The government is willing to arrive at a conciliation with Vodafone and is in the process of finding mediators for the process," he told CNBC-TV18.
Salve adds that there is no provision in the I-T Act to write-off tax dues and all disputes related to the Vodafone deal need to be dealt with together.
Below is the edited transcript of the interview on CNBC-TV18
Q: Your initial reaction to the Andhra Pradesh High Court’s landmark judgement on Sanofi?
A: I do know whether the judgment is based primarily on the treaty defence or whether it has gone into the retrospective validity. Sanofi’s case, to the best of my recollection, was a pretty straightforward case based on the treaty.
Q: What will be the impact on other M&A deals? Will this have any impact on the Vodafone case?
A: I don’t know whether the court’s decision was based on constitutional validity or on the issue of the treaty. If judgment was decided on constitutional validity I am sure the government will come running at full speed to the Supreme Court. If the judgment was issued based on the treaty, the government will bring it to the notice of the Supreme Court and that will be specific to the facts of the treaty.
Q: Can you clarify Vodafone's decision to arrive at a conciliation and approached the government with an offer on Thursday?
A: It maybe not be entirely accurate to say Vodafone had approached the government for conciliation. Vodafone had issued a notice based on the Bilateral Investment Treaty (BIT) and was called for meetings and one of the solutions suggested was to arrive at a conciliation. There is a timeline fixed in BIT for conciliation and that timeline had expired.
If the government is willing to engage that is clearly the preferred course of action and the government is prepared to engage and both parties are in the process of trying to find a mediator or conciliator to.
Now one of the concerns as a lawyer which I have had and which I have asked Vodafone to be looking at, is that the government would have to empower itself to reduce any tax liability beyond the statutory liability because there is no provision in the Income Tax Act, which says that the government can write-off tax dues.
Now if that is so, and even if the government agrees to be sensible in today’s day and age, somebody might bring a public interest litigation and say ‘Who’s the government to write-off tax payers dues?’
Q: Would Vodafone be interested in government’s initiative to settle and waive off the interest and the penalty? Is that the kind of message that has been recently sent out to the government?
A: That is something that the Vodafone management alone can answer.
Q: What do things stand- is Vodafone demanding a conciliation with the International Arbitration Tribunal to decide the amount?
A: If the government stands by its position then of course Vodafone has the option of the Bilateral Investment Treaty (BIT). If the government agrees it would have to address other related problems. The manner in which it has sought to impose tax on the hiving off of the call centre was clearly a plan hatched by the income tax department and now with the transfer pricing again, I believe it is trying to catch hold of Vodafone.
One does not settle one dispute only to land in a second dispute. All disputes relating to the transaction would have to be given aequitas, otherwise one cannot keep litigating different facets of this transactions and settling facets of this transaction.
Vodafone bought a share and gave that to Vodafone India Ltd. So what was Vodafone Essar is now Vodafone India. If you are going to try and tax that transaction in six different ways, then obviously Vodafone would look for closure in each of the six ways.