Vodafone Wins International Arbitration Against India Govt In Rs 22K Crore Tax Case

Permanent Court of Arbitration in Hague, the Netherlands (courtesy www.bilaterals.org)

Vodafone Group Plc has won an international arbitration case against the Indian government in a tax dispute case.

The Permanent Court of Arbitration in The Hague, Netherlands, ruled that the Indian government’s demand of Rs 22,100 crore as retrospective tax was “in breach of the guarantee of fair and equitable treatment”.

The Indian government has also been directed by the court to reimburse 4.3 million pounds to Vodafone Group as costs incurred for legal representation, assistance and fees paid to the arbitration court.

“The respondent’s (India’s) conduct in respect of the imposition on the claimant (Vodafone Group) of an asserted liability to tax notwithstanding the Supreme Court judgment is in breach of the guarantee of fair and equitable treatment,” the court ruled.

Vodafone had moved the Hague court in 2016 after the parties failed to agree on an arbitrator.

The Indian government had, in 2009, issued a demand of Rs 7,990 crore in capital gains tax in Vodafone Group’s $11 billion-dollar deal involving acquisition of 67 per cent of Hutchison Whampoa. After adding interest and penalty, the total demand against Vodafone Group amounted to Rs 22,100 crore.

Vodafone challenged the government’s demand and contended that they wouldn’t have to pay the capital gains tax since India and the Netherlands had a bilateral investment treaty.

Vodafone Group had also challenged the tax demand in India’s Supreme Court, which had ruled in favour of the former. The government amended the finance act in 2012 and applied the tax retrospectively.