Attorney general G E Vahanvati has reportedly advised the finance ministry that it could go ahead with recovery of tax dues from British Telecom giant Vodafone after the controversial retrospective amendments to the Income Tax Act.
The country's law officer is said to have given the advice on a reference made by the then finance minister Pranab Mukherjee whose retrospective tax changes introduced in 2012-13 had been slammed by foreign investors.
The attorney general's assertion comes in the backdrop of Mukherjee's successor P Chidambaram's review of tax provisions that had a retrospective effect, a move expected to help regain confidence of investors.
Minister of state for finance S S Palanimanickam had told the Rajya Sabha in a written reply last week that the income tax department would take "appropriate action" with regard to a tax demand of Rs11,218 crore from Vodafone.
"The Assessing Officer, as a quasi judicial authority, will take appropriate action in the light of the Supreme Court judgement and Section 119 of the Finance Act, 2012," the minister had said.
On 22 October 2010, the income tax department passed an order determining a tax liability (including interest) of Rs11,218 crore on Vodafone after its acquisition of the stake of Hutchinson in Hutch-Essar through a deal in Cayman Islands in 2007.
The order, however, was quashed by the Supreme Court in January this year, but later the Income Tax Act was amended with retrospective effect to bring such deals into the tax net.
The October 2010 order is being sought to be validated under section 119 of the Finance Act 2012. The department had also passed an order for the imposition of a penalty of Rs7,900 crore, in April 2011, which however, was not enforced in view of a direction of the apex court dated 15 April 2011.