Finance Ministry Appoints RC Lahoti as Arbitrator in Vodafone Tax Case

The central government has appointed former Chief Justice of India RC Lahoti as arbitrator in the Rs. 20,000 crore tax dispute case with UK-based telecom major Vodafone.

"Yes, he (Lahoti) has been appointed for arbitration from our side," a Finance Ministry official told PTI.

The government's decision was in response to an arbitration notice served by Vodafone International Holdings B.V. in April under the Bilateral Investment Protection and Promotion Agreement between India and the Netherlands for resolving the dispute.

(Also see: Vodafone Challenges Modi's Pro-Business Talk to Resolve Tax Dispute)

Following the international arbitration notice by Vodafone, the Cabinet of the previous United Progressive Alliance regime on May 15 approved the withdrawal of a conciliation offer.

The Cabinet had approved the conciliation with Vodafone in June last year in a bid to resolve the capital gains tax dispute related to its 2007 acquisition of Hutchison Whampoa's stake in Hutchison Essar.

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.

(Also see: Vodafone Facing Total Tax Liability of Rs. 27,000 Crore in India)

The Supreme Court had ruled in Vodafone's favour in 2012, saying the company was not liable to pay any tax over the acquisition of assets in India from Hong Kong-based Hutchison.

The government, however, amended the tax laws with retrospective effect to undo the Supreme Court judgement and claim taxes.