The government has decided to withdraw the conciliation offer to Vodafone to resolve the Rs 20,000-crore tax dispute case and collect the dues after the UK-based telecom company insisted on bringing in transfer pricing disputes within the ambit of negotiations.
The Finance Ministry has floated a draft Cabinet note in this regard, sources said, adding the law ministry has backed termination of the conciliation proceedings with Vodafone.
The Ministry opted to withdraw conciliation talks with Vodafone International Holdings BV after the company served a supplementary notice last month to the government under the Bilateral Investment Promotion and Protection Agreement (BIPA) over the tax dispute.
The notice, sources said, demonstrates Vodafone's reluctance to have conciliation within the scope of the terms approved by the Cabinet in June last year.
While the basic tax demand for the 2007 acquisition is Rs 7,990 crore, the outstanding dues, including a penalty of a similar amount and accrued interest, run into Rs 20,000 crore.
The revenue department, sources said, will pursue the tax demand along with accrued interest and penalty. The I-T Department had kept its tax notice to Vodafone in abeyance following the Cabinet decision to resolve the tax dispute through non-binding conciliation talks.
The Cabinet is now likely to soon take up the case as the Law Ministry has concurred with the Finance Ministry's proposal to withdraw from conciliation.
"The I-T Department may proceed as per the provisions of the Income Tax Act to collect the outstanding demand from the company," the Law Ministry said in its comment on the new Cabinet note.
Vodafone declined to comment on the issue.
