The Indian government will contest the compensation awarded to Vodafone by an international court at The Hague in its retrospective tax dispute, while simultaneously reaching out to foreign institutional investors reassuring them that India will honour its obligations and taxation policy.
The parent company of Vodafone India had won its case against the Centre at the Permanent Court of Arbitration against the about Rs 40,000 crore levied as retrospective tax dues. However, the government remains confident it can successfully challenge the enforcement of the award in Indian courts, sources told the Business Standard.
The ruling let Vodafone and its Indian subsidiary off the hook for the taxation amount, a breather for the company's operations in India as it is facing an immense debt burden. The case relates to Vodafone's acquisition of Hutch in 2007, and trying to get the company pay tax on its purchase despite the Income Tax Act being amended to cover the deal only in 2012.Investment initiative had soured because of the Indian government's retrospective taxation in the deal, and the government's outreach to foreign investors is essential. Vodafone's win at the PCA brought the focus back to India's obligations to many foreign investors it is trying to woo, and assure them the country will follow a uniform tax policy.