The govt has
brushed aside the pressure being built by the global trade bodies in the
Rs 11,000 crore Vodafone tax dispute case and asserted that the British
telecom major cannot invoke the India-Netherlands investment treaty as
the USD 11.2 bn deal was signed in Cayman islands.
"The
trade bodies are no one to pressurise the government on what to tax and
what not to. Similar retrospective amendment was made in UK last month and Vodafone was made to pay tax there. Then why are they having problems in India ?" questioned a senior Finance Ministry official.
Several
global bodies have written letters to Prime Minister Manmohan Singh and
other ministers saying that the government's proposal to amend Income
Tax Act to bring into tax net Vodafone-type overseas deals involving
domestic assets would hurt foreign investment.
They
have asked US Treasury Secretary Timothy Geithner to raise the
controversial issue at ongoing IMF-World Bank Spring Meetings at Washington and also with Finance Minister Pranab Mukherjee during the bilateral talks.
Referring to the recent threat of Vodafone to invoke bilateral investment treaty with the Netherlands
on the tax issue, the official said the arbitration clause in the BIPA
(Bilateral Investment Protection Agreement) cannot apply in
Vodafone-Hutchison deal as it was signed in Cayman islands.
"The
deal happened in Cayman islands and they are invoking India-Netherlands
BIPA," the finance ministry official said, adding "while in the Supreme
Court Vodafone said that the deal happened outside India, under BIPA it is saying it has made substantial investment in India."
Earlier
this week the Dutch Subsidiary of UK-based Vodafone served a 'dispute
notice' to the government threatening international arbitration under
the bilateral investment treaty between India and the Netherlands for retrospective amendment of Income Tax Act.
The
proposed amendment in Finance Bill 2012, when approved, would bring
overseas deals such as Vodafone's purchase of Hutchison under tax net
and the UK-based telecom firm would be liable to pay Rs 11000 crore tax
for its acquisition of Hutchison's stake in Hutchison Essar Ltd in 2007.
Vodafone,
it may be mentioned, had earlier won the tax dispute case in the
Supreme Court which held that the company was not liable to pay Rs
11,000 crore stemming from its 2007 acquisition of Hutchison's stake in
Hutchison-Essar.
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