New Delhi: The world's largest telecommunication services provider Vodafone Group Plc Tuesday served a notice of dispute on the Indian government, and threatened to invoke international arbitration proceedings over new retrospective tax proposals, which would bring the company back under the tax net over its $11-billion purchase of Hutchison group's Indian operations in 2007.
The British telecom giant, which served the notice through its Dutch subsidiary -- Vodafone International Holdings BV, said that the proposals in the Finance Bill 2012 violated the international legal protections granted to Vodafone and other foreign investors.
"Vodafone has asked the Indian government to abandon or suitably to amend the retrospective aspects of the proposed legislation as Vodafone would prefer to reach an amicable solution to this matter," the company said in a statement.
The Indian government in the Budget 2012-13 proposed a clarification in tax rules to bring under the tax net all cross-border mergers and acquisition deals involving Indian assets or businesses, with effect from 1962 when the rules were written.
On January 20 this year, the Supreme Court of India ruled in favor of the UK-based Vodafone Plc, dismissing $2.2 billion tax demand by the Indian tax authorities from the company on its acquisition of Indian operations of Hutchison.
The apex court said that the income tax department has no jurisdiction over Vodafone's buyout of overseas entities, routed through other foreign companies, as the deal happened between two foreign entities outside the purview of the country's taxman.
The UK-based company said in the statement that if the Indian government will not amend the retrospective rules it proposed recently, it will take all the necessary steps to protect its shareholders' interest, including beginning international arbitration proceedings under the Bilateral Investment Treaty, an agreement between India and the Netherlands.
Under the bilateral treaty, the Government of India is obliged to give fair and equitable treatment to foreign investors and not breach the legitimate expectations of investors.
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