BRITISH phone giant Vodafone served a legal notice today on the Indian government over a plan to retroactively tax overseas business deals, saying it violated the rights of foreign investors.
Vodafone asserts the Indian move is a bid to bypass a Supreme Court ruling dismissing a $2.2bn (£1.37bn) tax bill imposed on the company over its takeover of Hong Kong-based Hutchison Whampoa’s Indian cellular unit in 2007.
Vodafone said it has served the Indian government with a “notice of dispute” over the proposed retroactive tax legislation announced in last month’s budget.
The legislation “violates the international legal protections granted to Vodafone and other international investors in India,” the company said in an emailed statement.
“This is the first step required prior to the commencement of international arbitration,” under an investment treaty between India and the Netherlands, the company added.
The notice was served by Vodafone’s Dutch subsidiary, Vodafone International Holdings BV, as the takeover was struck between Vodafone's Dutch subsidiary and a Cayman Islands-based company that held Hutchison Whampoa’s India assets.
New Delhi’s planned change to the Income Tax Act would be retroactive to 1962 and would oblige domestic and foreign firms alike to pay tax on any transaction involving an Indian asset.
“Vodafone has asked the Indian government to abandon or suitably to amend the retrospective aspects of the proposed legislation,” the company said.
The company said that if the government fails to act on its request, “Vodafone will take whatever steps are necessary to protect its shareholders’ interests, including commencing investment treaty arbitration proceedings.”
