Vodafone India given December 31 deadline to respond to tax liability issue

Vodafone has been asked to give the final reply by Tuesday on the government proposal for a non-binding conciliation to settle the Rs. 11,200 crores tax dispute, finance minister P Chidambaram has said.

"The conciliation has not started. Why has it not started? As the CEO of Vodafone told me they have multiple legal advisors and they do not seem to know which is the correct legal advice. We have written to them recalling the promise made by the CEO when he met me that they will give a final answer in about 2-3 weeks. I think we have told them to give us the final answer by the 31st of December," Chidambaram said in a TV interview.

(Also see: Finance minister asks Vodafone to respond to pending tax issue in writing)

Seeking to resolve the long-standing tax dispute with Vodafone , the Cabinet in June had approved non-binding conciliation with the British telecom major.

The outcome of the conciliation, however, needs to be ultimately vetted by Parliament as it would require amendment to the Income-tax Act.

Vodafone has been asked to pay Rs. 11,200 crores tax on its 2007 acquisition of Hutchison Whampoa's stake in Hutchison Essar.

The conciliation has been proposed under the Indian arbitration law and not under the UNCITRAL as sought by Vodafone. However, no timeframe has been set for the conclusion of the conciliation proceeding.

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

But the government, later in the year, changed the rules to enable it to make retroactive tax claims on the already-concluded deals.