In the long ongoing tax dispute worth Rs. 20,000 crore, on Friday, 25 September 2020, United Kingdom telecom major Vodafone Group Plc on Friday won an international arbitration against India over retrospective tax demand of ₹20,000 crores. Along with giving relief to Vodafone to pay the tax amount, the tribunal in its the ruling said that the government should pay a compensation of 4.3 million pounds for the legal costs incurred, assistance, and for fees paid by the company to the arbitration court. 

The dispute dates back to 2007 when Vodafone acquired Indian mobile assets from Hutchison Whampoa, involving the purchase of 67 percent of Hutchison Whampoa for a sum of 11 billion $. At that time the government raised a demand that Vodafone was liable to pay a sum of Rs. 11,000 crore for the above said acquisition. On contesting against the same, the sum increased to Rs. 20,000 due to the imposition of interest and penalties. When the Hon’ble Supreme Court of India ruled in the favour of Vodafone, the government amended the finance act in the year 2012 retrospectively, in order to ensure than Vodafone has to pay the tax on their acquisition. 

Aggrieved by the same, Vodafone initiated arbitration proceedings against India. The company had moved to the arbitration court in 2016 after both parties failed to agree on an arbitrator for the process. 

After years of legal battle, the Permanent Court of Arbitration in The Hague held Indian tax authorities in breach of fair treatment doctrine and that the conduct of the Income Tax authorities were in no way fair or equitable. 

The tribunal ruled that the Indian government's imposition of tax liability on Vodafone is in breach of the investment treaty agreement between India and the Netherlands, Reuters reported while quoting a source. “The respondent’s (India’s) conduct in respect of the imposition on the claimant (Vodafone Group) of an asserted liability to tax notwithstanding the Supreme Court judgment is in breach of the guarantee of fair and equitable treatment,” the court ruled. 

The Arbitral Tribunal held that it has jurisdiction to consider Vodafone's claims on breach of the treaty between the two countries. Indian authorities have been directed to "cease the conduct in question". The tribunal also warned that failure to comply with will "engage its international responsibility". 

On the above ruling, the Ministry of Finance said, "The Government will be studying the award and all its aspects carefully in consultation with our counsels. After such consultations, the Government will consider all options and take a decision on a further course of action including legal remedies before appropriate fora,". 

This news has been reported by Ms. Roshni Kapoor