Govt seeking deal with Vodafone over tax claim: report

The government is considering a compromise with Vodafone Plc on the taxman's claim of over Rs1,100 crore as capital gains tax under a proposed new law which would have retrospective effect, according to a report.

The proposal would pare the tax dues of Vodafone to about Rs7,900 crore, The Economic Times suggested, citing an unnamed source.

If the report is factual and if Vodafone agrees to the proposal, it could go a long way towards assuring jittery foreign investors that any retrospective change in tax laws won't be applied arbitrarily and across the board.

The report said ET's source emphasised that no decision had been taken as opinion was divided within the finance ministry; the nation's top leadership would take a final decision.

If the changes in the Income-Tax Act are approved by Parliament, as they are soon likely to be, the I-T department may issue a formal order or circular to exempt companies from paying penalty for failure to deduct capital gains tax on cross-border deals that took place before 1 April 2012, the report says.

In Vodafone's case, the compromise involves asking the company to pay tax of about Rs7,900 crore, sparing it from penalty of an equal amount for failure to deduct tax at source.

Top officials of Vodafone Plc, including group chief executive Vittorio Colao and recently appointed non-executive chairman Analjit Singh, had met finance minister Pranab Mukherjee and other officials on Tuesday in connection with the retrospective tax amendments proposed in this year's finance bill.

However, both Colao and Mukherjee made bland, non-committal statements after the meeting.  (See: Vodafone heads huddle with Pranab over 'retro' tax; but no luck yet)