Cabinet may take up Vodafone conciliation tomorrow

Govt might consider amendments to Income Tax Act 1961 and Arbitration & Conciliation Act 1996 to resolve Rs 14,000-crore tax dispute

The cabinet may tomorrow take up amendments to two acts to enable conciliation with Vodafone over a tax row.

Those in the know told Business Standard that a proposal to this effect by the Finance Ministry may be considered by the cabinet.

The government might consider amendments to the Income Tax Act, 1961, as well as the Arbitration and Conciliation Act, 1996, to resolve its Rs 14,000-crore tax dispute with Vodafone. This is because the current law does not provide for conciliation between a firm and the sovereign state.

In January 2012, Vodafone had won a legal battle against the government when the Supreme Court ruled it did not need to pay taxes on its acquisition of Hutchison Whampoa’s India assets, as the transaction had been between two foreign firms and there was no provision to tax such deals.

The government then brought retrospective amendments in the I-T Act to tackle Vodafone-like cases. And, the I-T department sent a notice to Vodafone to pay Rs 14,000 crore, including Rs 6,000-crore interest.

There also is a provision to impose a penalty of 100% of the demand, which will be Rs 7,900 here.