Finance Minister Pranab Mukherjee on Wednesday said the government will examine the notice of Vodafone that threatened to drag India to international arbitration if the telecom giant was made liable to pay Rs 11,000 crore in taxes over a 2007 acquisition.
"It is their (Vodafone's) prerogative and we will examine the notice... As a legal entity, they are entitled to legal recourse," he said.
The minister was responding to a question on the legal notice served to the government by Vodafone's Dutch unit.
The company has served a notice of dispute to the Indian government invoking an investment treaty between India and the Netherlands in connection with tax liablity.
A proposal contained in the Finance Bill 2012 aims to amend law to retrospectively tax cross-border transactions dating back to April 1, 1962. The move follows the Supreme Court ruling that Vodafone wasn't liable for taxes stemming from its 2007 acquisition of Hutchison's stake in Hutchison-Essar.
At a CII meet, Finance Secretary R S Gujral said the proposed retrospective amendment and introduction of General Anti Avoidance Rules (GAAR) are not to harass any company.
"Let me say at this stage, intention of the government is not to hassle anyone or to trouble anyone," he said while dismissing concerns among the industry that the move proposed in the Budget would impede foreign investments.
Gujral also assured the industry that their concerns "will be resolved".
Vodafone sent the notice to Prime Minister's Office, with copies marked to Mukherjee, Law Minister Salman Khurshid and Telecom Minister Kapil Sibal, claiming the proposed law violated the international legal protections granted to Vodafone and other international investors in India.