British telecom company Vodafone never said that it was ready to resolve its tax dispute with theIndian government if the interest and penalty on the tax liability is waived, a person close to the company said.

"Vodafone has never expressed a willingness to settle the tax dispute at Rs 8,000 crore or any other amount," the person said. The development plays down speculation that the government and the UK firm are close to settling the high-profile tax dispute, which has hogged the headlines and is often cited by foreign investors as a cause for concern.

The person quoted earlier, however, said the company would prefer an amicable solution to the matter.

Last week, Vodafone India's non-executive chairman Analjit Singh had said, "If the government takes one step forward, Vodafone will also take a step forward."

Singh's comment, made after his meeting with finance ministry officials, came close on the heels of the parent company saying it could set aside funds to cover the potential tax liability in India, and sparked speculation that the company was open to settling the dispute with the government. "It is exactly an option. I don't know if its viable...We are ready to discuss a solution with the government," Singh had said when asked if the company would consider paying the tax liability of Rs 8,000-crore tax if the government waived the interest and penalty amounting to more than Rs 12,000 crore.

Indian tax authorities have slapped an about Rs 20,000-crore tax bill on Vodafone for failing to withhold tax on its 2007 acquisition of Hutchison Telecom business in India for $11.2 billion. The company contested the decision, saying the deal was not taxable as it was executed overseas. The case landed up in the Supreme Court, which earlier this year ruled in the company's favour.

But the government retrospectively amended the tax laws in the budget for the current year, allowing authorities to tax overseas indirect transfers involving underlying Indian assets.

The amendment drew flak from domestic and international businesses and governments and was blamed widely for negative investor sentiment.

However, after P Chidambaram's appointment as finance minister, a panel headed by tax expert Parthasarathi Shome was asked to examine the retrospective law. The committee's report is expected by the weekend. Chidambaram has also used conciliatory language, brightening hopes of a settlement. There have been past instances of the Central Board of Direct Taxes, the apex body for direct taxes in India, allowing waiver of penalty and payment of tax in installments to remove hardship due to any retrospective change in tax law.

This was the case when an amendment was carried out in section 80 HHC in 2005 and applied retrospectively from 1998-99, when Chidambaram was finance minister. The circular had exempted interest and penalty and also allowed taxpayers to pay their dues over five years.

"The board has powers to issue a circular to remove unintended hardship for a class of investors," an income tax official said. (Economic Times)