{"id":70982,"date":"2020-09-30T16:07:24","date_gmt":"2020-09-30T10:37:24","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=70982"},"modified":"2021-02-05T11:20:17","modified_gmt":"2021-02-05T05:50:17","slug":"retrospective-taxation-vodafone-case","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/retrospective-taxation-vodafone-case\/","title":{"rendered":"Retrospective taxation \u2013 Vodafone case"},"content":{"rendered":"

Source-\u00a0<\/strong>The Hindu<\/strong><\/a><\/p>\n

Syllabus- GS 3-\u00a0<\/strong>Role of external state and non-state actors in creating challenges to internal security.<\/p><\/blockquote>\n

Context<\/strong>\u2013 The\u00a0Vodafone Group has won\u00a0one of the most high-stakes legal battles involving a foreign investor and the Indian state under international law. The retrospective taxation was in violation of the BIT and the United Commission on International Trade Law (UNCITRAL).<\/p>\n

What is the case<\/strong><\/p>\n

    \n
  1. In May 2007, Vodafone bought a 67% stake in Hutchison Whampoa for $11 billion.<\/li>\n
  2. In September that year, Indian government raised a demand of Rs 7,990 crore in capital gains and withholding tax from Vodafone, saying the company should have deducted the tax at source before making a payment to Hutchison<\/li>\n
  3. In 2012, the Supreme Court ruled in favour of the Vodafone group.<\/li>\n
  4. Later, the same year, the then Finance Minister, the late Pranab Mukherjee,\u00a0circumvented the Supreme Court\u2019s ruling by\u00a0proposing an amendment to\u00a0the Finance Act,\u00a0thereby giving\u00a0the Income Tax Department the power to retrospectively tax such deals.<\/li>\n
  5. Vodafone then initiated arbitration in 2014 invoking the\u00a0Bilateral Investment Treaty\u00a0signed between India and the Netherlands in 1995.<\/li>\n
  6. Ruling<\/strong>:\u00a0It ruled in favour of Vodafone as the taxation was in violation of\u00a0the BIT.<\/strong><\/li>\n<\/ol>\n