Government willing to restart conciliation talks with Vodafone

The government appears to be willing to restart conciliation talks with UK-based Vodafone if the telecom firm makes up its mind to settle the Rs 20,000 crore tax dispute.

A day after Finance Minister P Chidambaram said it is up to the revenue department to enforce the tax notice on the company, highly placed sources said if Vodafone makes up its mind on conciliation, it can happen in a few days.

"If Vodafone decides to begin the conciliation, if two conciliators can be appointed, then the conciliation process should not take more than a few days," sources said.

The conciliation talks had broken down after Vodafone issued a supplementary notice to the government, invoking the Bilateral Investment Promotion and Protection Agreement (BIPA) and demanded that a separate transfer-pricing case be clubbed with the capital gains tax matter.

The Finance Ministry has already circulated a draft Cabinet note withdrawing the conciliation offer to Vodafone.

"In Vodafone's own words, they are unable to make up their mind whether they should go forward with conciliation. The conciliation did not even start," Chidambaram had told PTI yesterday.

The Cabinet had in June 2013 approved a Finance Ministry proposal to go in for conciliation with Vodafone to resolve the capital gains tax dispute related to its acquisition of Hutchison Whampoa's stake in Hutchison Essar in 2007.

While the basic tax demand for the acquisition is Rs 7,990 crore, outstanding dues, including a penalty of a similar amount and accrued interest, run into Rs 20,000 crore.

"There is no need for a fresh notice. The notice is already there," Chidambaram had said, adding that it is for the tax department to decide whether to enforce the notice.

According to sources, Vodafone wanted to club a Rs 3,700 crore transfer-pricing case of Vodafone India Services with the capital gains tax issue, a demand that was not acceptable to the Finance Ministry.

As the matter is pending in the Bombay High Court and the Government of India is being represented by the Finance Ministry, the issue could not be included as part of the conciliation talks, sources said.

The Supreme Court had ruled in Vodafone's favour in 2012, saying it 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 make retrospective tax claims on concluded deals.

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