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Vodafone back in India's sights for more tax
1. Vodafone back in India's sights for more tax
22 April 2015
Matthew Gilleard - ITR
The Indian government is attempting to promote a more taxpayer-friendly environment, but is not
being helped by demands from the tax authorities for more revenue from multinational companies.
Vodafone received a notice this week relating to tax assessments for 2009-2010 and 2010-2011.
The exact nature of the enquiry is not clear, but the telecommunications company has been issued a
notice under section 148 of the Income Tax Act, which deals with income that has not been properly
assessed.
"Interestingly, the subject matter of the dispute is not known," said Sanjay Sanghvi, partner at
Khaitan. "It is not known as to what the notice issued under section 148 is seeking to tax by
reopening a completed tax audit."
Vodafone may now be required to provide additional information relating to the two tax years in
question. The company confirmed it is not commenting on the issue at the moment.
Non-adversarial regime?
After January's decision by the Indian government not to appeal a Bombay High Court ruling which
absolved Vodafone from paying a Rs 3,200 crore tax demand, the government continued to state that
it was working hard to make the country hospitable for foreign investors.
Maulik Doshi, partner at Sudit K Parekh, described January's announcement on the Vodafone non-
appeal as "a big and welcome step by the government to restore investor confidence".
2. "The finance minister, Arun Jaitley, has from time-to-time reiterated the government's resolve to
make the tax regime non-adversarial in India," said Doshi.
Even before that decision, Arun Jaitley, finance minister, told International Tax Review in December
that giving taxpayers certainty was a priority.
"We have taken a number of measures towards establishing a predictable and non-adversarial tax
regime, where all stakeholders including foreign investors can do their business without any tax-
related pain," he said.
However, not all of the authorities' actions since then have conformed to this approach.
The most recent hit to investor confidence centred on the scope of India's minimum alternate tax
(MAT). While not traditionally levied on foreign portfolio investors, the wording of the law does not
prohibit this and the government has now chosen to send tax bills to more than 100 foreign
investors, and others could follow.
"Some recent developments like levying MAT on FIIs [foreign institutional investors] and other
foreign investors are something which will create some conflict with stated policies and the
government's assurance on having a non-adversarial and taxpayer-friendly regime in India," said
Sanghvi.
More to follow...
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