Tuesday, 14 May 2013

Law ministry does U-turn, agrees to conciliation in Vodafone tax case

In a turnaround from its earlier position, the law ministry has given a go-ahead to resolving the Rs 11,200 crore Vodafone tax dispute through conciliation. 

The ministry had rejected the conciliation proposal from the British telecom major to settle the long-pending dispute with Indian Income-Tax authorities. 

"We have agreed to talk. We will see if there is any possibility of an agreement," new Law Minister Kapil Sibal told The Indian Express referring to the Vodafone issue. 

Earlier, the ministry had rejected the proposal on the grounds that it is not permissible under the existing Income Tax Act, 1961, and executive decisions could not override the Act. In January, the finance ministry had sent a reminder notice to the telecom giant for payment of tax following which Vodafone proposed conciliation. 

The ministry had then sought the Attorney General's view on the matter. The AG was of the opinion that the government will have to first amend the I-T Act, providing for such conciliation, only after which it would be able to go in for such an exercise. 

However, since the finance ministry is already working on a new direct tax code, it put the ministry in a tough spot on whether to bring in substantial amendments in the existing act or wait for the new code to get implemented. 

But with a new law minister in place, finance ministry officials met Sibal on Sunday following which he agreed to seek a fresh opinion of the AG on Monday. The file was cleared Monday evening and sent to the finance ministry, a ministry official said. 

"In view of the clarifications received from the finance ministry earlier, the AG has opined that there is nothing to stop the finance ministry from opening a line of communication with the telecom company," the official added. 

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