New Vodafone Red plans launched
New Vodafone Red plans launchedReuters

Vodafone Group Plc and the Indian government's wrangling over taxation has now escalated to a hearing at the International Court of Justice (ICJ), according to reports.

The telephone major wants the Hague-based ICJ to intervene in the retrospective taxation case, and also help appoint a third arbitrator, it said.

The process of international arbitration, which began two years ago, hasn't progressed without a third arbitrator. Both parties, however, have appointed their respective counsels in a three-member team, who have also failed to select the crucial and presiding third person, PTI reported. 

Incidentally, the escalation indicates Vodafone's rejection of the Indian government's one-time settlement offer announced during the recent Budget. Tax disputes, it was said then, could be solved by paying only the principal amount while the interest and penalties would be waived.

Vodafone's total tax demand today stands at Rs 14,300 crore (including interest and penalty), of which the principal amounts to Rs 7,990 crore, said FE.

Vodafone however has claimed the principal amount/tax in itself is retrospectively charged on an acquisition which happened 2007. A 2012 Supreme Court judgment too had ruled that the taxation was retrospective. Despite this, the government had subsequently brought in the controversial retrospective tax amendment to overturn the court decision.

As rapprochement the government initiated a conciliatory mechanism in 2012, which it later retracted as Vodafone went in for arbitration proceedings at an international level under the India-Netherland Bilateral Investment Treaty (BIT).

The government held the view then that tax matters do not come under the purview of the BIT.

[1 lakh = 100,000 | 1 crore = 10 million | 100 crore = 1 billion]