Cabinet to take call on Vodafone tax dispute: Chidambaram

Finance Minister P Chidambaram on Wednesday said the Union Cabinet will take a final call on settlement of the Rs 11,200-crore (Rs 112 billion) Vodafone tax case after seeking opinion of the Attorney General.

"As far as Vodafone is concerned, they had written to us proposing conciliation. We have written back saying that yes your request will be considered by the competent authority. So the matter will go to the Cabinet," Chidambaram said.

Vodafone, which is facing a tax liability of Rs 11,200 crore for purchase of Hutchison Whampoa's stake in its Indian telecom business in 2007, had written to the Finance Ministry seeking settlement of the tax issue.

This follows Finance Ministry's reminder notice to the UK-telecom giant Vodafone in January for payment of tax.

Replying to queries on tax notice to Shell in the transfer pricing case, Chidambaram said such cases involving transfer of domestic assets in overseas deals have been referred to Attorney General G E Vahanvati for his opinion.

"So far as Shell is concerned and number of cases similar to that, there are order that have been passed. There is order of the tribunal in one.

"So what is the scope and interpretation of Chapter 10 to a case of this nature where shares have been allotted by a subsidiary to the parent company? That question has been referred to the Attorney General few days ago and we are awaiting the advise of the AG. We are approaching all these cases in a purely professional manner," Chidambaram said.

The income tax department has charged Shell India with under-pricing a share transfer within the group by Rs 15,220 crore (Rs 152.2 billion),

and consequently evading taxes.

The order relates to the issue of 8.7 crore (87 million) shares by Shell India to an overseas company Shell Gas BV in March 2009.

The government is likely to announce some steps to deal with the complex issue concerning indirect transfer of Indian assets through overseas deals in the Budget for 2013-14, which will be unveiled in the Lok Sabha on February 28.

The Vodafone tax liability arose due to amending of the Income Tax Act, 1961, with retrospective effect during the tenure of the then Finance Minister Pranab Mukherjee to undo the Supreme Court judgement that had ruled in favour of the company.

The government is working towards a solution based on recommendations of the Parthasarathi Shome panel, which suggested that either the government withdraw the retrospective tax amendment or waive interest and penalty in case it had to recover the taxes.

MNCs like Shell and Nokia have expressed concern over the letters being sent by the tax authorities with regard to duty evasion.

Last month, I-T department officials had conducted a survey operation in the premises of the Finnish cellphone major Nokia in Chennai on charges of alleged tax evasion.

Taxmen are reportedly seeking up to Rs 3,000 crore (Rs 30 billion) from Nokia for alleged duty evasion.

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