Vodafone Tax Dispute: PIL in Supreme Court to Restrain Centre from Arbitration

Supreme Court has been approached by Biswajit Bhattacharya, former Additional Solicitor general, seeking a direction from the Supreme Court to the centre to recover around Rs 20,000 crore tax dues from UK telecom major Vodafone and to restrain the government from going ahead with arbitration on the issue. The petition has been mentioned before a vacation bench comprising of Justice Vikramajit Sen and Justice Shiva Kriti Singh.

The petitioner was a law officer during the UPA regime. The petition reportedly demanded the implementation of the amended 2012 rule to claim taxes and pleaded to the apex court to intervene in the matter by directing the Centre to administer the Income Tax Act "impartially, even handedly and without fear or favor".  The petition said, "It amounts to arbitrariness of state action not to enforce law (Section 9 of IT Act) for 27 months after its enactment. This violates Article 14 of the Constitution," adding, "Allowing arbitration proceedings under India-Netherland BIPA (Bilateral Investment Protection Agreement) would flagrantly violate rule of law”

Former Chief Justice of India, R.C. Lahoti was earlier appointed by the Finance Ministry as the arbitrator in the Rs.27, 000-crore tax dispute with Vodafone Group Plc as an effort to resolve the dispute with the telecom sector after the arbitration notice sent on April 17 by the Telecom giant. In the notice, Vodafone had expressed its desire to initiate the arbitration proceedings, without waiting for the ITAT verdict on the Rs. 3,700-crore transfer pricing case.

After the arbitration notice in May, the UPA Government had withdrawn its conciliation notice that had been tendered in April. While a verdict through conciliation is not binding on both the parties, an arbitral award is binding.

Vodafone had invoked its rights under the India- Netherlands Bilateral Investment Treaty, serving the Government with a Notice of Dispute threatening international arbitration if the amendment was not abandon[ed] or suitably amend[ed].

The PIL will be heard on 1^st July.