NEW DELHI: The government cannot waive the multi-billion dollar tax liabilities that
Vodafone and
Cairn
Energy face, although it has done the most it could in offering to remove interest and penalty if the principal is paid, revenue secretary Hasmukh Adhiahas said.
In an interview,
Adhia
said the government had earlier indicated to companies facing taxes stemming from retrospective changes in rules to waive interest and penalty upon payment of principal amount to settle the dispute out of court. The Budget now makes the offer more formal and puts it on statue, he said. “The government has defined its limits. This is how far we can go.”
He said retrospective amendment to Income Tax Act was brought in by the previous government and the current government cannot undo it completely.
UK oil explorer Cairn Energy is facing a tax demand of Rs 10,247 crore on a 2006 business reorganization it carried out in its India unit before getting it listed. The company says it has paid all taxes due and there was no unpaid liability. It invoked India-UK BIPA to take the government to arbitration over the issue.
British telecom giant Vodafone is facing a tax liability over its $11-billion acquisition of 67% stake in the mobile-phone business owned by Hutchison Whampoa in 2007. Arbitration has been initiated on this issue as well.
To a query, what if the companies which have been contesting the tax demands end up not accepting the offer to pay the principal amount, Adhia said: “It is for them to take it or not. But the government’s sovereign right to recover will remain.”