Amid controversy over the government's decision to amend I-T Act with retrospective effect to bring into tax net overseas deals involving domestic assets, the British telecom major Vodafone on Monday said that the proposal is not in line with the international tax norms. "...the proposal to tax indirect transfers of Indian companies is without regard to international taxing norms and is not in line with the OECD or the UN model double taxation treaty," Vodafone said in a statement.

The company was responding to a statement by Revenue Secretary R S Gujral who had said that Vodafone-type deals were taxed in the US, the UK, other OECD countries and China.

Paris-based Organisation for Economic Cooperation and Development (OECD), a grouping of mostly rich nations, sets the international tax standards.

Vodafone, however, asserted "it is completely incorrect to suggest that these transactions are taxable in the USA, UK or any other OECD member state. They would not seek to tax the indirect transfer of shares as proposed by India."

The bone of contention between the Revenue Department and the British telecom major is Finance Minister Pranab Mukherjee's 2012 Budget proposal to amend the Income Tax Act with retrospective effect.

The amendment, once approved by Parliament, would make Vodafone liable to pay Rs 11,000 crore tax to the government in relation to its acquisition of Hutchison's stake in Hutchison Essar Ltd for $11.2 billion in 2007.

The Supreme Court had earlier ruled in favour of Vodafone in the tax dispute case.

The apex court, Vodafone said had "clearly ruled that the structure in the Hutchison-Vodafone transaction was bona fides, i.e. had a commercial and business purpose and was not established to avoid tax."

The company, however, said China has been taxing similar transactions since 2008. "However, this is on the basis of a clear GAAR provision which was introduced in 2008, and only applies where the structure lacks any commercial or business purpose. This is entirely different from the proposal in the Finance Bill," it added.

Vodafone has been paying all taxes due under the laws of India, and its total contribution to the Indian exchequer of the past five years amounts to more than Rs 25,000 crore, it said.

The Supreme Court, it said, had issued a clear and unambiguous judgement that the transaction between Vodafone and Hutchison was not taxable in India according to the laws in force in India in 2007.

Pointing out that the company treats Indian institutions with "greatest respect", Vodafone said, "it has full faith in the Indian judicial system and we would have accepted whatever outcome the Supreme court had determined." (IBN Live)