Vodafone tax issues to continue; solution likely post polls

Vodafone's desire to reconcile with the Indian government over it Rs 11000 crore tax dispute seems to have hit a roadblock as the talks are stuck on the issue of transfer pricing, reports CNBC-TV18’s Aakansha Sethi.

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Sources in the Finance Ministry have indicated that a resolution of the Vodafone tax case will now happen only after the elections with the new government because Vodafone is now insisting that the transfer pricing Rs 8,500 crore case be resolved along with the capital gains case.

The Finance Ministry’s view, meanwhile, is that is that the Bombay High Court has already dismissed Vodafone's plea on this and has asked them to approach the Income Tax appellate tribunal and the two cases cannot be clubbed together.
While the stalemate on the conciliation continues, the government is not going to initiate tax collection proceedings against Vodafone, even though that would be the legal course of action. This is because it is concerned about foreign investments as well as the widening Current Account Deficit (CAD). So, even though no resolution is in sight and one is likely only after the elections at least Vodafone is not going to have to pay tax at this point in time.
Vodafone is faced with over Rs 11000 crore tax liability along with interest on its 2007 acquistion of Hutchinson Whampoa’s stake in Hutchinson Essar.