The Vodafone tax controversy pertains to Mukherjee`s Budget proposal to amend the Income Tax Act, 1961 with retrospective effect to bring into tax net overseas mergers and acquisitions involving domestic assets. The move followed the Supreme Court ruling that Vodafone wasn`t liable for taxes stemming from its USD 11.2 billion acquisition of Hutchison`s stake in Hutchison-Essar in 2007. Worried over the impact of the proposed retrospective amendment on the company, Dutch unit of Vodafone had served a legal notice to the government threatening to drag India to international arbitration on the issue.
Vodafone sent the notice to Prime Minister`s Office, with copies marked to Mukherjee, Law Minister Salman Khurshid and Telecom Minister Kapil Sibal, claiming the proposed law violated the international legal protections granted to Vodafone and other international investors in India.
Vodafone has served the notice of dispute invoking an investment treaty between India and the Netherlands in connection with tax liability. The meeting was also attended by Revenue Secretary R S Gujral, Chairman of Central Board of Direct Taxes (CBDT) Laxman Das, Joint Sectrary (International Taxation) S K Mishra and Vodafone India Non-Executive Chairman Analjit Singh.