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BW Businessworld

Government Advised Against Challenging Vodafone Tax Ruling

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The attorney general has recommended the government refrain from appealing a Bombay High Court ruling in favour of Vodafone Group Plc in a long-running tax dispute.
Vodafone, the biggest foreign corporate investor in India, has been involved in a series of tax disputes since it entered the country seven years ago, aiming to tap the world's second-biggest mobile phone market by customer numbers.
In this case, the tax office accused Vodafone India Services Private Ltd, a unit of the British group, of under-pricing shares in a rights issue to its parent company and demanded tax of about 30 billion rupees ($486 million).
The Bombay High Court last month ruled in favour of Vodafone. The tax department then sought the opinion of the attorney general on whether the order should be challenged at the Supreme Court, according to local media reports.
The government will take a final decision on whether to appeal, a person directly involved in the matter said.
A finance ministry spokesman said he could not immediately comment on the development.
Many tax experts expect the Narendra Modi government to hold off from appealing the court ruling, as such a move could boost foreign investor sentiment needed to help revive an economy after two years of annual growth below 5 per cent.
Vodafone is separately contesting a more than $2 billion tax demand over its acquisition of Indian mobile operations in 2007 from Hutchison Whampoa.
The Federation of Indian Chambers of Commerce and Industry (Ficci) welcomed Attorney General Mukul Rohatgi asking the income tax department not to file an appeal against the judgement.
"Ficci welcomes the decision of the government not to appeal against the judgement relating to the transfer pricing tax issue involving Vodafone," FICCI President Sidharth Birla said in a statement.
His opinion comes in the backdrop of reports that the income tax department was keen on challenging the October 10 judgement of the High Court.