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Retro tax settlement window to shut on Dec 31

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The government has fixed December 31, 2016, as the deadline to multinational companies, including Vodafone and Cairn, to settle their tax issues that arose as a result of the retrospective amendments to the Income Tax Act.
The two companies have so far not shown any inkling to opt for the government’s dispute resolution scheme, which opened on June 1.
Tax experts say since the principle tax amount is large, a better deal might have to be negotiated for these firms to give up their right to appeal or seek remedy from courts, as the matter has already reached the international arbitration stage.
Under the Dispute Resolution Scheme, the government has offered aone- time tax settlement, subject to firms agreeing to withdraw pending cases. In the offer, the government would waive the penalty and interest amount. The interest and penalty in both the Cairn and Vodafone cases are much larger than the original tax demand. In the case of Cairn Energy Plc, the Union finance ministry has issued a notice of ? 18,800 crore interest as of February 2016, in addition to ? 10,200 crore tax demand made on the company two years earlier.
UK- based Vodafone too is facing a tax demand of ? 7,990 crore, with the total amount rising to about ? 20,000 crore after interest and penalty.
“We have not heard from these companies yet. But the one- time settlement offer is open only till December 31. This is an opportunity for them as they have long- term interests in India,” said a government official.
While Vodafone did not respond to the questionnaire sent to them till the time of going to press, Cairn did not directly answer a query on whether they would opt for the scheme. It is instead looking for compensation from the government. “International arbitration proceedings, under the UK- India Investment Treaty, have commenced to settle the tax dispute which has been ongoing between Cairn Energy PLC and the Government of India since January 2014. Cairn has filed its Statement of Claim to the international arbitration panel. The decision of the arbitration panel will be final and binding,” said a Cairn spokesperson.
The arbitration panel is being chaired by Laurent Lévy, who is joined on the panel by two partyappointed arbitrators, Stanimir Alexandrov and Christopher Thomas.
The company said it had legal advice that the indian government’s actions in seeking to apply tax retrospectively to the internal group reorganisation in 2006 and “ in freezing Cairn’s assets in India are a breach of the Treaty, which protects against expropriation and ensures a fair and equitable investment environment for Britishinvestors in India”.
Business Standard New Delhi,12th July 2016

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