Government to refund over Rs 2,500 cr to Vodafone

20 Mar, 2012, 09.32PM IST, PTI

Government to refund over Rs 2,500 cr to Vodafone: Salman Khurshid

NEW DELHI: Within hours of Supreme Court dismissing the review petition in the Vodafone's tax case, Law Minister Salman Khurshid said the government will have to refund money (about Rs 2,500 crore and interest) to the firm.

"No curative petition to my knowledge ... I suppose government will have to refund Vodafone money," he told reporters after a meeting of top ministers called by Finance Minister Pranab Mukherjee this evening.

The curative petition is the last judicial remedy available with the government. The hurriedly called meeting was attended by Home Minister P Chidambaram, Telecom Minister Kapil Sibal and Attorney General G E Vahanvati, among others.

In its judgement on January 20, the Supreme Court had set aside the Bombay High Court ruling and asked the Income Tax Department to return Rs 2,500 crore deposited by Vodafone International Holdings within two months along with 4 per cent interest.

The apex court had held that the tax department does not have jurisdiction to levy Rs 11,000 crore as tax on the USD 12 billion overseas deal between Vodafone International Holdings and Hutchison Group.

Following the judgement, the government had filed the review petition, which was dismissed today. "I said review has been dismissed, law remains what is being stated by SC," Khurshid said, adding the government can tax a company on the basis of the existing law.

The Government, meanwhile, has proposed amendment in the Income Tax Act, under which such overseas mergers and acquisition would be taxed retrospectively from 1962.

"You can only tax on the basis of existing law. We have no right to tax them, current law will prevail so long law is not changed," Khurshid said.

Under the proposed amendment to the I-T Act, whether resident or non-residents having business connection in India will be required to deduct tax at source and pay it to the government even if the transaction is executed on a foreign soil.

However, Khurshid said that one should not link dismissal of the review petition with that of the Finance Bill as latter has independent existence and stands on its own merit.

"We should not confuse Finance Bill with this (dismissal of review petition). Finance Bill has independent existence. It is retrospective. It stands on own merit and when Finance Bill be passed will create a new situation," the Law Minister said.

He further said, "we should wait till the Finance Bill is passed and we all are aware that there is provision which is being proposed in the Finance Bill ... Once the Finance Bill is passed, consequences of the passage of the bill and whatever provisions are provided in that bill then rule the law of land."

Commenting on the today's decision of the Supreme Court, HDFC Chairman Deepak Parekh said, "Actually, it's a good decision ... We would have liked the government to amend this regulation prospectively not retrospectively ... because going retrospectively means going against the Supreme Court judgement".