14:40 GMT18 January 2021
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    In September this year, the Permanent Court of Arbitration in The Hague ruled in favour of the UK's Vodafone Group in a tax matter involving the Indian government. The Court of Arbitration also observed that India's retrospective tax demand on Vodafone violated India-Netherlands agreement.

    The Indian government has refused to declare before the Delhi High Court whether it will challenge an award given in favour of British telecom company, Vodafone in a $3 billion tax dispute by the Permanent Court of Arbitration in Hague. 

    Remaining non-committal on whether the government will appeal against the Permanent Court of Arbitration's ruling on the matter involving India's $3 billion tax demand on Vodafone, a government counsel told the Delhi High Court that India's bilateral investment protection agreement (BIPA) with United Kingdom cannot be used as bait to make inferences on India's legal recourse. 

    "One can't stick an India-UK BIPA gun to my head to elicit a response on whether we will challenge the arbitration award," the government counsel said on Tuesday. 

    The topic came up during a hearing of Vodafone's second arbitration proceedings initiated by the company in 2018 under the India-UK BIPA. Earlier, Vodafone filed for arbitration proceedings under India-Netherlands BIPA to settle the tax dispute with the Indian government.

    The Indian Ministry of Finance has not yet decided whether it will appeal against the award. Industry representatives say it is a tough call for the government with revenue concerns on one side and its image as an investment destination on the other. 

    Vodafone Tax Dispute 

    The tax dispute with Vodafone dates back to 2012, when the Indian government - led by the Indian National Congress then - made retrospective changes to the domestic tax laws to bring the Vodafone Hutchison deal within the tax net. 

    In 2007, Vodafone bought Hutchison Whampoa through the former's subsidiary in the Netherlands.

    After the deal, the Indian government said that Vodafone needed to pay tax on asset transfer and raised the tax demand, which Vodafone contested in the Indian court. 

    In 2012, the Supreme Court of India ruled in favour of Vodafone. However, after the court’s ruling, the Indian government amended the tax laws retrospectively to bring the deal under the tax net and raised demand of $3 billion.

     

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    arbitration, dispute, tax, India
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