British telecom giant Vodafonehas decided against making a provision in its balance sheetfor the over Rs 11,000 tax claim made by Indian authoritiesfor its 2007 deal to acquire stake in Hutchison-Essar.
"The Group did not carry a provision for the litigationor in respect of the retrospective legislation at 30 September2012 or at previous reporting dates," Vodafone Group said inits first half financial results filing.
The Income Tax Department had raised a Rs 11,218 croretax demand (including Rs 7,900 crore tax demand and theremaining interest) from Vodafone for its acquisition ofHutchison stake in Hutchison-Essar in 2007 through a deal inCayman islands. But the Supreme Court struck down the tax claim.
Following the Supreme Court judgement, the government inthe Finance Bill, 2012 proposed amendments to the Income-taxAct, 1961, with retrospective effect to bring under tax netoverseas mergers and acquisitions involving Indian assets.
In April 2012, a Dutch Subsidiary of UK-based Vodafoneserved a 'dispute notice' to the Indian government,threatening international arbitration under the BilateralInvestment Treaty (BIT).
The Group said it is also confident of making asuccessful claim under the Dutch-India Bilateral InvestmentTreaty in case it receives any further tax demands.
"Should further demand for taxation be received by VIHBVor any member of the Group as a result of the newretrospective legislation, the Group believes it is probablethat it will be able to make a successful claim under the BIT,which will not result in an outflow of economic benefits fromthe Group," it said.