Telecommunications major Vodafone has won an arbitration case against the government under the India-Netherlands Bilateral Investment Treaty, BloombergQuint reported on Friday. The international arbitration tribunal in The Hague ruled that the Indian government’s imposition of a tax liability of Rs 20,000 crore on Vodafone is in breach of the investment treaty.
The tribunal in its ruling also said that the Indian government must pay over Rs 40 crore to Vodafone as partial compensation for its legal costs, NDTV reported. It said the government cannot seek any dues from the telecom major.
The tax dispute involving Rs 12,000 crore in interest and Rs 7,900 crore in penalties began after Vodafone’s acquisition of the Indian mobile assets from Hutchison Whampoa in 2007. The Indian government insisted that Vodafone pay taxes on the acquisition, which the company refused.
In 2012, the Supreme Court of India ruled in favour of Vodafone. However, the government changed the rules to enable it to tax agreements that had already been concluded. Subsequently, in 2014, Vodafone initiated arbitration proceedings against India. Vodafone contended that the demand for paying taxes violated the principles of equitable and fair treatment under the India-Netherlands treaty.
However, some telecom companies including Vodafone owe adjusted gross revenue dues to the government. The Supreme Court of India on September 1 gave telecommunications companies 10 years to pay adjusted gross revenue dues. Justice Arun Mishra said that the telecom firms must pay the dues in annual installments commencing from April 1, 2021, till March 31, 2031. The firms must also keep alive the adjusting bank guarantees until the payments are made.