Vodafone wins arbitration at The Hague against India in the Rs. 22,000 crore retro tax case

British telecom major Vodafone Group Plc won an international arbitration against India over retrospective tax demand of Rs. 22,000 crore. The Permanent Court of Arbitration in The Hague ruled that conduct of Income Tax Department is in breach of 'fair and equitable' treatment.

The tribunal ruled that the Indian government's imposition of a tax liability on Vodafone is in breach of the investment treaty agreement between India and the Netherlands.

Vodafone had approached the International Court of Justice (ICJ) in 2016 due to a lack of consensus between the parties' arbitrators in finalising a judge for the tax dispute.

A tribunal headed by Sir Franklin Berman was constituted in June 2016 after Vodafone challenged India's use of a 2012 legislation that empowered the retrospective taxation of deals like Vodafone's $11 billion acquisition of a 67% stake in the mobile phone business owned by Hutchison Whampoa in 2007. This tax law had been enacted by India with retrospective effect that bypassed a Supreme Court judgement that went in Vodafone's favour.

The telecom major challenged India's demand of Rs. 22,100 crore in capital gains taxes (including interest and penalty) under the Netherlands-India Bilateral Investment Treaty (BIT). The two sides could not resolve the issue in negotiations that followed and in April 2014, Vodafone served an arbitration notice.