Vodafone Group plc has won an international arbitration case against the Indian government in a $ 2 billion tax dispute, two sources with direct knowledge of the matter said.
An international arbitration tribunal in The Hague ruled that India imposed a tax liability on Vodafone, as well as interest and penalties, were in violation of an investment treaty agreement between India and the Netherlands, one of the sources said.
The tribunal said in its decision, the government should stop seeking arrears from Vodafone and the company should pay £ 4.3 million ($ 5.47 million) as partial compensation for its legal costs, the source said.
Vodafone and India’s Finance Ministry did not immediately respond to a request for comment.
The tax dispute stems from Vodafone’s acquisition of Indian mobile assets, acquired in 2007 from Hutchison Whampoa. The government said that Vodafone is responsible for paying tax on the acquisition, which the company contested.
In 2012, India’s top court ruled in favor of the telecom provider, but the government later changed the rules for that year to enable it to tax deals that had already been concluded.
In April 2014, Vodafone initiated arbitration proceedings against India.
India has been embroiled in more than a dozen international arbitration cases against companies including Cairn Energy over retrospective tax claims and cancellation of contracts. If it loses, the government treasury may have to pay billions of dollars. (Reported by Aditi Shah Editing Juan Rocha, Robert Birsel)
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