Vodafone Wins International Arbitration against India in Rs 20,000 Crore Tax Dispute Case

Vodafone Group Plc has won an international arbitration case against the Indian government in a $2 billion (Rs 20,000 crore) retrospective tax dispute, according to two sources with direct knowledge of the matter.

The tribunal ruled that the Indian government’s imposition of a tax liability on Vodafone is in breach of the investment treaty agreement between India and the Netherlands, one of the sources said.

The Permanent Court of Arbitration at The Hague ruled that the conduct of India’s tax department violated “fair and equitable” treatment.

Observing that the retrospective taxation despite the Supreme Court’s judgment in favour of Vodafone was in breach of the bilateral investment treaty, the court has directed India to reimburse Rs 40.3 crore (GBP 4.3 million) to Vodafone.

Vodafone had moved the International Court of Justice (ICJ) in 2016 due to a lack of consensus between the parties’ arbitrators in finalising a judge for the tax dispute.

Afterward, a tribunal headed by Sir Franklin Berman was set up in June 2016 after Vodafone challenged India’s use of a 2012 legislation giving it powers to retrospectively tax deals like Vodafone’s $11 billion acquisition of a 67% stake in the mobile phone business owned by Hutchison Whampoa in 2007. This tax law had been enacted by India with retrospective effect and sidestepped a Supreme Court judgement that went in the company’s favour.

The telco challenged India’s demand of Rs 7,990 crore in capital gains taxes (Rs 22,100 crore after including interest and penalty) under the Netherlands-India Bilateral Investment Treaty (BIT).

(With inputs from Reuters)