A former Additional Solicitor General on Thursday petitioned the Supreme Court to direct the Union government to recover tax dues of around Rs. 20,000 crore from UK telecom major Vodafone plc and to restrain the government from going ahead with arbitration on the dispute.
Bishwajit Bhattacharyya, who deals with tax matters and was a law officer during the Congress-led United Progressive Alliance regime, mentioned his petition before a vacation bench headed by Justice Vikramajit Sen, which posted the case for hearing on July 1.
Bhattacharyya submitted that the Centre is not implementing the rule that was amended in 2012 to claim taxes, and pleaded to the apex court to intervene in the matter by directing the Centre to administer the Income Tax Act ”impartially, even handedly and without fear or favour”.
The tax dispute stems from Vodafone’s acquisition of Indian mobile assets from Hong Kong based Hutchison Whampoa in 2007 via a stake in Hutchison Essar.
In 2012, after the Supreme Court ruled that Vodafone was not liable for payment of any tax in India on the acquisition, the government changed the tax laws with retrospective effect to enable it to tax deals that had already been concluded.
”It amounts to arbitrariness of state action not to enforce law (Section 9 of IT Act) for 27 months after its enactment. This violates Article 14 of the Constitution,” the petition said, adding, “Allowing arbitration proceedings under India-Netherland BIPA (Bilateral Investment Protection Agreement) would flagrantly violate rule of law.”
He submitted that the IT Act does not recognise conciliation as a dispute settlement mechanism and the tax dispute does not come within the ambit of BIPA.
Recently, the government had appointed former Chief Justice of India R.C. Lahoti as arbitrator in the tax dispute case.
The government’s decision was in response to an arbitration notice served by Vodafone International Holdings B.V. in April under BIPA for resolving the dispute.
Following the international arbitration notice by Vodafone, the UPA government’s cabinet had approved the withdrawal of a conciliation offer on May 15.
The Cabinet had approved the conciliation with Vodafone in June last year in a bid to resolve the capital gains tax. While the basic tax demand was Rs. 7,990 crore, the total outstanding, including interest and penalty, is estimated to have risen to Rs. 20,000 crore.