Vodafone wins $2 billion tax dispute case against the Indian government


Afterward, a tribunal headed by Sir Franklin Berman was set up in June 2016 after Vodafone challenged India's use of a 2012 legislation giving it powers to retrospectively tax deals like Vodafone's Dollars 11 billion acquisition of a 67 percent stake in the mobile phone business owned by Hutchison Whampoa in 2007. It also directed India to pay £4.3 million ($5.47 million) to the company as compensation for its legal costs, one of the sources added.

Less than a month after his passing, one of the less lauded legacies of Pranab Mukherjee got laid to rest on Friday with the worldwide arbitration order in favour of Vodafone in the infamous retrospective tax case. "The award may be challenged in execution proceedings in India as being contrary to the public policy of India, but it is hoped that such challenges are dismissed and the doctrine of fairness is given primacy", Gulati said. Following the amended Income Tax Act 1961, the authorities renewed the tax demand on Vodafone, at which point VIH resorted to the first investment treaty arbitration under the India-Netherlands BIT in 2012. In January 2012, the apex court sided with Vodafone, saying that India's IT department had no jurisdiction to levy tax on an overseas transaction between companies incorporated outside India. "Spoiled India's name, need to reverse!" he tweeted. Or to seek some sort of review. Even prior to Vodafone's Indian unit's merger with Idea Cellular in August 2018, the case related to the parent British firm on which the tax demand was raised. The Hague State Permanent Court of Arbitration has ruled in favor of Vodafone. Hence, as India does not seem to disengage itself from global investment law altogether, it would do well to "internalise" worldwide investment law, and BITs as a matter of policy. The Centre also has a track record for challenging arbitration rulings. The government can only go back to the Permanent Court of Arbitration on some technical point, but that will not serve any objective. While the arbitral award has yet not been made public, it is worthwhile to take a look at the history of the dispute and the implications of the ruling for India. Vodafone contended that the demand for paying taxes violated the principles of equitable and fair treatment under the India-Netherlands treaty. "The tribunal held that any attempt by India to enforce the tax demand would be a violation of India's worldwide law obligations". "These cases are at different stages of pendency and will naturally reach their logical conclusion", Jaitley had said. "While many bilateral investment treaties have been scrapped by government or modified not to cover taxation within their ambit, this space is likely to witness further action", he said.

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"BITs entered by India in the past were wide enough to cover tax issues".

The pressure from the Indian government did have an effect on Vodafone-top honchos of the company were soon caught up in conflict resolution and parleys with the govt officials.