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Cabinet okays truce with Vodafone over tax case

If the Vodafone case is successfully resolved, an amendment in the Income-Tax law may follow, which will further benefit companies who are facing a similar problem.

Sunny Sen | June 5, 2013 | Updated 13:41 IST

The Vodafone tax case took a new turn on Tuesday (June 4) when at a cabinet meeting, Finance Minister P. Chidambaram said the case could go into a conciliation process. The cabinet approved his suggestion.  
 
British telecom giant Vodafone is facing a Rs 11,217 crore tax liability in India. "The cabinet today approved a proposal of the finance ministry for non-binding conciliation on the issue," Chidambaram said later.
 
The case arose after Vodafone bought the Hong Kong based Hutchison Whampoa's telecom business in India in 2007, but no tax was paid since the transaction took outside India. Tax officials booked a case against Vodafone under transfer pricing issues seeking billions of dollars.
 
The cabinet approval may not satisfy Vodafone, unless the final payment after the conciliation is acceptable to the company.
 
Earlier, in 2012 Vodafone had already won the case against the Income Tax department in the Supreme Court of India. However, the victory was short lived as the government changed the Income-Tax act with retrospective effect, and the Supreme Court ruling became void.
 
Chidambaram also said the names of the conciliators would soon be conveyed to the Prime Minister. Thereafter, both parties would jointly discuss the non-binding conciliation. If both agree on the amount payable, the company will seek board approval for payment, while the government will take cabinet approval.
 
The Vodafone case, if successfully resolved, will have repercussions. An amendment in the Income-Tax law may follow, which will further benefit companies who are facing a similar problem.

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