Business / India's arbitrator also ruled in Vodafone's favour in ₹20,000 cr tax dispute case

New Delhi: Telecom giant Vodafone on Friday won a significant ruling against the Indian government in an international court over ₹ 20,000 crore in dues which it had described as unfair.

Ruling in favour of Vodafone Group, the Permanent Court of Arbitration in Hague stated that the Indian tax department’s conduct of imposing a tax liability along with interest and penalties was in breach of guarantee of fair and equitable treatment of the terms laid out in the bilateral investment treaty between the Netherlands and India.

Confirming the ruling in favour of the company, Vodafone Plc in a statement to FE said, “Vodafone confirms that the investment treaty tribunal found in Vodafone’s favour. This was a unanimous decision, including India’s appointed arbitrator Rodrigo Oreamuno. The tribunal held that any attempt by India to enforce the tax demand would be a violation of India’s international law obligations.”

The tribunal, in its ruling, said the government must cease seeking the dues from Vodafone and should also pay over ₹ 40 crore to the company as partial compensation for its legal costs, the source said.

"Vodafone has finally got justice. The government of India came with a retrospective amendment trying to recover the tax which the Supreme Court had struck down... The tribunal has today said that this action is violative of the bilateral investment treaty," Anuradha Dutt, managing partner of DMD Advocates, a New Delhi-based firm which argued for Vodafone

According to the award, the government of India will reimburse Vodafone 4,327,294.50 pounds or its equivalent in US dollars, being 60% costs for legal representation and assistance, and 3,000 euros or its equivalent in US dollars, being 50% of the fees paid by Vodafone to the appointing authority.Government sources said that tribunal's ruling meant that "no damages have been awarded against Government of India" but conceded that they will have to pay about ₹ 40 crore which is 60 per cent of the tribunal's administrative cost while the rest 40 per cent would be borne by Vodafone.

"Also, Government of India may have to refund the tax collected, which is about ₹ 45 crore, only if it does not go for appeal against the award. Therefore, the total outgo would be around ₹ 85 crore only.

It is learnt that the award is under study by Indian authorities and its legal counsels who would seek suitable legal remedies at appropriate forums," sources said.