Government won't appeal HC's Vodafone order

NEW DELHI: The Centre on Wednesday said it would not appeal against a Bombay high court order in a Rs 3,200 crore tax case involving telecom giant Vodafone to avoid "fruitless litigation" and comfort investors about stability of Indian policies.
"The government ... wants to convey a clear message to investors that this is a government where decisions will be fair, transparent and within the four corners of law," communications minister Ravi Shankar Prasad said.
The move could pave the way for similar treatment in several other cases as attorney general Mukul Rohatgi had advised the government to accept the orders of courts and tribunals that have decided in favour of a taxpayer. Prasad said a decision be taken after studying the other cases.
"We welcome the Indian government's decision not to appeal the Bombay HC ruling. Stability and predictability in tax matters are important for long-term investors such as Vodafone," a spokesperson sa8id in an e-mailed statement.
The case involving Vodafone India Services Pvt Ltd is a transfer pricing dispute, dating back to August 2008, and is different from the Rs 13,000 crore capital gains tax levy which was to be paid by Hutch when it sold its stake to the British major. That issue is under international arbitration as the UPA government had decided to retrospectively amend the tax laws after Supreme Court ruled in favour of Vodafone.
Several multinationals such as Shell and Nokia have complained of getting an unfair deal. The Dutch oil major won a similar transfer pricing case in the Bombay HC. Nokia decided to shut shop after it had to keep the Indian plant, and its vendors such as Flextronics too is downing shutters due to what many term as "adversarial" tax regime.
Although the Modi government has tried to make the rules more predictable, investors are still wary in certain segments. On Tuesday, finance minister Arun Jaitley told tax officers that "we have to address two major concerns - quick decision-making and stability in policy matters and reforms in tax structure and administration" to tap into the interest among investors eyeing India as an investment destination.
The Cabinet decision is meant to address some of the concerns as the high court had held that the transfer pricing case did not hold. The decision followed the opinion of the chief commissioner, CBDT chief as well as Rohatgi, officials said.
"We are trying to correct the legacy issue," Prasad said. By this decision, he said, "a kind of signal we have given namely where the I-T liability is clear and unambiguous, it shall be charged. Where it is over stretched without legal authority, the government will be fair. That is the indication. It shows our fairness".