Finance minister Arun Jaitley said that the decision to tax Vodafone Group retrospectively, taken by the UPA 2 government, was 'erroneous' and that the present government will not be going down that path. "I always felt Vodafone tax decision was an erroneous decision... This govt will not be taking any retrospective decision," Jaitley said, talking to a packed house at the Economic Times Global Business Summit 2018 on Saturday.The comment came in response to questions from the audience about stability of policy, rules and regulations, a key ask from overseas investors, who have seen the Vodafone tax case play out for nearly a decade.Jaitely added that if any investor chooses another destination over India , it can't be for the Vodafone tax issue but about other issues.The government at that time had raised a tax demand of Rs 11,000 crore raised by the government related to Vodafone’s USD 11 billion acquisition of Hutchison Telecom stake in 2009.The government had said then, that the Hutchison-Vodafone deal was liable for tax deduction at source (TDS) under the Income Tax (IT) Act, and since Vodafone had not deducted the tax at source, the government raised the demand, which has expanded to Rs 20,000 crore including interest and penalties.While the Supreme Court subsequently quashed the demand on January 20, 2012, the government amended its IT Act retrospectively, putting the liability back on Vodafone Group.Consequently, Vodafone Group, through its Dutch subsidiary - Vodafone International Holdings BV (VIHBV) – in April 2012 invoked arbitration under India-Netherlands BIPA and then issued notice of arbitration of in April, 2014.While proceedings under India-Netherlands BIPA were pending, it initiated a second arbitration under the India-UK BIPA in January, 2017, which was challenged by the Indian government on the grounds that two claims were based on the same cause of action and sought identical reliefs but from two different tribunals constituted under two different investment treaties against the same host state.In the hearings in the Supreme Court last year, the Centre argued that disputes encompassing tax demands raised by a host state were beyond the scope of arbitration provided under the BIPA as taxation was a sovereign function and could only be agitated before a constitutional court of the host state.The apex court had said on December 14 last year that the chairman or presiding arbitrator can be appointed so that the tribunal is set up, but it should not commence hearing till the Delhi High Court decides the pending matter. The hearing in this matter is still going on.
