Vodafone tax decision after Shome panel report: FM

Finance minister Palaniappam Chidambaram said on Monday that the Income Tax Department would take a decision on the Vodafone taxation issue after the Parthasarathi Shome Committee gives its report on the vexed question of General Anti-Avoidance Rules (GAAR).

Talking to reporters, he said the decision whether to send another tax notice to the British telecom major will be taken by the assessing officer concerned in the backdrop of the amendment to the Income Tax Act earlier this year, the Supreme Court judgment in the Vodafone case, and the opinion of the attorney general on the issue.

"Section 119 (the controversial tax laws amendment brought about by former finance minister Pranab Mukherjee) today is part of the law. We said that there is a judgment in the Supreme Court, there is Section 119 and there is opinion of the AG. And it is for the assessing officer to take all this into account before deciding the next step.

"Whether another notice is required or not is for him to decide. But in the meanwhile, he will also take note of the fact that we have referred this question to the Shome Committee and the Shome Committee will give its report shortly," the finance minister said.

The Income Tax Department passed an order on 22 October 2010 determining a tax liability (including interest) of Rs11,218 crore on Vodafone on its acquisition of Hutchinson Whampoa's stake in Hutch-Essar through a deal in the Cayman Islands in 2007.

The Supreme Court however quashed the order in January this year as not tenable under law. Subsequently, the Income Tax Act was amended with retrospective effect to bring such deals into the tax net.

The Shome committee was set up by Prime Minister Manmohan Singh in July to address the concerns of foreign and domestic investors on GAAR. The panel has already submitted a draft report.