The Cabinet has cleared the finance ministry's proposal to withdraw conciliationoffer given to Vodafone for resolving the Rs 20,000 crore tax row with UK-based telecom company. 

 

"The Cabinet in its last meeting on May 15 has cleared withdrawal of conciliation offer to Vodafone," a source said. 

The decision to withdraw the conciliation offer follows an international arbitration notice by Vodafone to India in the tax case.

Vodafone in a letter to the revenue department dated March 13 had stated they saw no merit in reviewing the matter of conciliation in the Rs 20,000-crore capital gains tax dispute case after receipt of the decision of the ITAT. 

The telecom firm further said that the only body capable of resolving the issue would be an arbitration panel constituted according to the Bilateral Investment Promotion and ProtectionAgreement (BIPA). 

Last week, the Finance Ministry in a statement had said it had been to approach the Cabinet again, bringing these facts to its notice and seeking approval for withdrawing from conciliation. 

It said that without waiting for the outcome of the ITAT proceedings, Vodafone International Holdings B.V.(VIHBV) has served a 'Notice of Arbitration' dated April 17 seeking arbitration under the BIPA between India and the Netherlands. 

Earlier in February, the Cabinet had deferred considering the proposal to withdraw from conciliation talks with the UK-based firm, pending settlement of Rs 3,700 crore Vodafone's transfer-pricing case at the Income Tax Appellate Tribunal (ITAT). 

Last year in June, the Cabinet had approved conciliation with Vodafone to resolve the capital gains tax dispute related to its 2007 acquisition of Hutchison Whampoa's stake in Hutchison Essar. 

While the basic tax demand is Rs 7,990 crore, the total outstanding is Rs 20,000 crore, including penalty. 

The Supreme Court had ruled in Vodafone's favour in 2012, saying the company was not liable to pay any tax over the acquisition of assets in India from Hong Kong-based Hutchison. 

The government changed the rules later in 2012 to enable it to claim tax retrospectively on concluded deals.  (Times of India)