The new government must initiate urgent tax reform to encourage companies and revive investor confidence.

\"The larger view is that retrospectivity is avoided to the maximum. The fiscal regime, the policy regime, taxation regime must be very evident because India needs investment,\" Law Minister Ravi Shankar Prasad told reporters after taking charge of the ministry.

Vodafone boss Vittorio Colao has challenged India's new government to back up its pro-business credentials by resolving the telecoms group's long-running tax dispute in the country.

With tax authorities pressing with over Rs 21,000 crore in unpaid dues, Finnish telecom major Nokia has invoked the Bilateral Investment Promotion and Protection Agreement (BIPA) India has with Finland to resolve the dispute.

The British telecom service provider has started international arbitration proceedings against the Indian government since both sides have been unable to find an \"amicable means of resolving the dispute\".

Vodafone has served a fresh arbitration notice to India over the Rs 20,000 crore tax dispute, a development that has prompted the Indian government to seek withdrawal of its conciliation offer to settle the row amicably.

The government will have to take this outstanding dispute head on and resolve it one way or other so as to send the clear message to international investors that India means business, writes Sanjay Sanghvi, partner, Khaitan and Co.

Vodafone has been asked to give the final reply by Tuesday on the government proposal for a non-binding conciliation to settle the Rs 11,200 crore tax dispute, Finance Minister P Chidambaram has said.

\"IBM does not agree with the tax department's claims and will aggressively defend itself through the appropriate judicial process,\" a company spokesperson said.

\"Vodafone continues to be in talks with the Indian government to see if we can establish a framework which would allow discussions to begin regarding a possible solution,\" the company said in a statement when asked if it has agreed to the conciliation talks with the Indian government.

Vodafone has been involved in a Rs 11,200 crore tax dispute for the purchase of Hutchison's stake in Hutchison Essar in 2007.

Sounding confident of finding a way out on the Vodafone tax case, Finance Minister P Chidambaram on Friday said the final call on the British telecom firm's offer of conciliation will be taken by the Cabinet.

Finance Minister of India P Chidambaram has exuded confidence that the Rs 11,200 crore Vodafone tax dispute will be resolved within a month.

In a move that hints at ending of row between Indian tax authorities and Vodafone, the Revenue Department sent a reply to the British telecom major's representation on Rs 11,200 crore tax issue and also expressed its willingness to discuss the matter with company officials.

Finance Minister P Chidambaram said a decision will be reached in the in Vodafone tax case only after considering all aspects, including recommendations of the Shome Committee on indirect transfer of assets.

Uninor, the Indian venture of Norway-based Telenor, put its entire telecom business on auction for a minimum of Rs 4,000 crore, a move opposed by its minority stakeholder Unitech.

Against the backdrop of the controversy over Vodafone tax issue, Prime Minister Manmohan Singh in an interview to a national daily sent out clear signals to foreign investors saying there will be \"no arbitrariness\" in tax matters.

Vodafone is considering to reduce its confrontation with income tax (I-T) authorities and could seek a solution through the Income Tax Settlement Commission in the Rs 20,00-crore tax case.

West Bengal Chief Minister Mamata Banerjee was still awaiting a debt waiver package from the Centre, but the IPL win was enough to send her into a celebratory mood.

The government had last month informed the Parliament that amendment to the I-T Act would bring into tax net Vodafone-type deals which is expected to yield to the exchequer Rs 35,000 to Rs 40,000 crore.