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Cabinet to decide on Vodafone tax issue

New Delhi, Feb. 20: Finance minister P. Chidambaram today said the cabinet would take a final call on the Vodafone tax case.

Vodafone is expected to pay between Rs 8,000 crore and Rs 11,000 crore in unpaid taxes relating to its $11.2-billion buyout of Hutchison Essar’s operations in April 2007.

“We are working on it (Vodafone tax case) in a professional manner, the cabinet will have a final say in the matter,” Chidambaram told reporters a day after British Prime Minister David Cameron met his Indian counterpart Manmohan Singh.

The revenue department had sought $2 billion in taxes for a $11.2-billion deal between two overseas entities — Vodafone International Holdings, a Dutch subsidiary of Vodafone Plc, and Hong Kong-based Hutchison Whampoa and its associate firms.

Chidambaram said the issue on Shell share transfer pricing had been referred to the Attorney General for further clarifications.

Indian tax authorities last month issued another order to Vodafone alleging that its Indian entity had under-priced its shares issued to a Mauritius-based group company reportedly by around Rs 1,300 crore. The tax authorities have challenged the valuation method adopted by Vodafone India Services while issuing shares to Vodafone Teleservices Mauritius in 2007-08.

Vodafone officials last month met revenue secretary Sumit Bose and Poonam Kishore, chairperson of the Central Board of Direct Taxes, to discuss the issue of original tax at source demand.

Vodafone has argued that it was not liable to pay the tax as it was the buyer and not the recipient of the proceeds from the deal. The government insisted that Vodafone should have withheld a certain sum from the payout as tax deducted at source and given it to the government.

The latest initiative from the North Block suggests that an old truce offer, which was made about a year ago, has been revived.

 
 
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