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British telecom major Vodafone has filed an application to settle the retrospective tax case with India, aiming to put an end to the decade-long dispute.

In its application, the British telecom major has agreed to indemnify the government against any future claims, according to a top government official quoted in a report in The Economic Times.

The government official told the publication that Vodafone has applied under the new settlement legislation and the company will be issued Form 2, which signals the acceptance of the application. This will pave the way for the issue of a refund of tax paid.

From the magazine | Retrospective taxation: Biting the bullet

It may be noted that the government will refund Rs 44.7 crore to Vodafone as part of the tax settlement.

The development comes after Cairn Energy Plc had earlier filed an application to settle its retrospective tax dispute with the Indian government. Cairn Energy has already been issued Form 2, according to the official quoted in the ET report.

It is worth mentioning that Vodafone has filed the application under a separate set of provisions. These were issued by the government in mid-October under Section 119 of the Finance Act.

Both Cairn Energy and Vodafone have opted for settlement after the government introduced new legislation to scrap the retrospective tax law. The government had earlier amended the Income Tax Act, 1961 and the Finance Act, 2012, to scrap the retrospective taxation clause that was introduced in 2012.

The dispute dates back to a 2007 deal in which Vodafone acquired Hutchison Essar for $11.2 billion. Although the deal was executed abroad, the tax department in India claimed that Vodafone did not pay tax on the deal and issued a notice to it.

The retrospective tax law has faced heavy criticism over the years after it was introduced. Both Vodafone and Cairn Energy challenged the law in international arbitration court and got a favour in their verdict. Following the verdicts, the government finally came out with an amendment to scrap the retrospective taxation clause for good.

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India today

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