Retrospective tax issues: Govt open to out-of-court settlement

Pic for representational purpose

New Delhi: Keen to put an end to the overhang of legacy issues, the government is open to any proposal for an out-of-court settlement of retrospective tax issues like the ones facing Vodafone and Cairn Energy, Revenue Secretary Hasmukh Adhia has said.

British telecom giant Vodafone as well as Scottish explorer Cairn Energy have dragged government to arbitration against tax demands raised after enacting a legislation that allowed tax to be levied retrospectively. "The present government has made it very clear that there would be no more retrospective taxation," Adhia told PTI.

"However, there are some legacy cases which arose because of retrospective amendment in the past which we are trying to settle within the existing legal framework," he said. Asked if the government is open for an out-of-court settlement, Adhia said, "the government is open to any proposal of out-of-court settlement."

Vodafone has been slapped with a tax demand of Rs 7,990 crore, which together with interest and penalty comes to Rs 20,000 crore, over its 2007 purchase of Hutchison Whampoa Ltd's Indian assets.

British oil explorer Cairn Energy plc was in January last year issued a tax notice of Rs 10,247 crore over alleged capital gains it made after it transfered its India business into a new subsidiary Cairn India and got it listed on stock exchanges in 2006. Both the firms have initiated arbitration against the tax demand. Adhia, however, refused to comment on either of the cases.

"I would not like to discuss any individual case," he said. The government had in July this year appointed international lawyer Rodrigo Oreamuno to arbitrate on its behalf in tax case with Vodafone. Costa Rica-based Oreamuno replaced former Chief Justice of India R C Lahoti who had in May recused himself. Vodafone has already named Yves Fortier of Canada as its nominee on the panel.

However, a third arbitrator, who will act as a chairman of the three-member tribunal for the case, has not yet been firmed up by Oreamuno and Fortier. In the Cairn issue, the government initially refused to join the arbitration but last month named Singapore-based lawyer J Christopher Thomas as its arbitrator. Cairn has already named former Bulgarian minister Stanimir A Alexandrov as its arbitrator.

A third arbitrator is yet to be named in the case.