Vodafone is facing tax liability over its $11 billion acquisition of a 67 per cent stake in the mobile-phone business owned by Hutchison Whampoa in 2007.
Keen to quickly resolve retrospective tax cases, Finance Minister Arun Jaitley on Monday made a one-time offer to UK's Vodafone Group plc and Cairn Energy plc to pay principal amount and get waiver on interest and penalty.
The proposal, however, did not get enthusiastic response with companies saying there is no tax liability on them as they had not done anything wrong.
"In order to give an opportunity to the past cases which are ongoing under the retrospective amendment, I propose a one-time scheme of Dispute Resolution for them," he said while presenting the Budget for 2016-17 in Parliament.
"They can settle the case by paying only the tax arrears, in which case liability of the interest and penalty shall be waived," he said, adding the companies would have to withdraw all pending litigation in courts or tribunals or arbitration proceedings.
While Jaitley did not mention of companies involved, Economic Affairs Secretary Shaktikanta Das subsequently said the comments were directed toward Vodafone and Cairn.
Cairn Energy is facing a tax demand of Rs 10,247 crore (Rs 102.47 bilion) on a 2006 business reorganisation it carried out in its India unit before getting it listed.
The company says it has paid all taxes due and there was no unpaid liability. It invoked India-UK BIPA to take the government to arbitration over the issue.
Vodafone, on the other hand, is facing tax liability over its $11 billion acquisition of a 67 per cent stake in the mobile-phone business owned by Hutchison Whampoa in 2007.
While the UK telecom group says it does not owe any tax as the transaction was conducted offshore, Income Tax department is seeking taxes on the deal because it involved assets in the country. Arbitration has been initiated on this issue as well.
"While international arbitration proceedings have commenced to seek resolution of the tax dispute, Cairn notes the efforts of the Government of India to resolve the retrospective tax issue and will study the text of the Budget speech," a Cairn spokesperson said.
Vodafone said, "We will of course study the details of what the Finance Minister has proposed today, while continuing to seek resolution of this matter through international arbitration."
"Vodafone has always maintained that there was no tax to pay at the time it completed its acquisition of Hutchison business in 2007... Vodafone was the acquirer in this transaction. The company made no capital gains whatsoever," a company spokesperson said.
When asked, if government hopes to get a settlement when companies disputing the principal liability in first place, Jaitley said: "They have two options-- either to litigate or settle".
