Vodafone Group wins court battle against Indian tax demand

There’s good tax news from India for the Vodafone Group – not, however, related to Vodafone Idea's $7 billion AGR debt, although it does seem to have saved the parent company $3 billion.

According to TeleGeography’s CommsUpdate, an international arbitration tribunal at the Hague has rejected the Indian government’s imposition of a $3 billion tax demand on the UK’s Vodafone Group. The tax related to the company’s entry to the Indian market through the acquisition of a controlling stake in the operator Hutchison Essar in 2007.

This payment demand has been disputed for nearly a decade. The tax was apparently imposed retrospectively through legislation passed in 2012 to allow the Indian government to renew its demands for the tax retrospectively.

The court’s decision was said to be unanimous when the tribunal reportedly accepted the Vodafone Group’s claim that the Indian tax department was in breach of an India-Netherlands bilateral investment treaty. The Indian government is apparently considering an appeal.

According to the Indian press, however, this win for Vodafone Group is not likely to improve the situation of local joint venture Vodafone Idea and is unlikely to mean that Vodafone Group will consider fresh investment in the company.

For the moment it seems likely that Vi (as Vodafone Idea is now known) may have to stick to its expected strategy of pushing up its tariffs on top of the planned raising of around $3.388 billion through a mix of equity and debt instruments in one or more tranches.

That said, the same press sources also suggest that this win – and recently established clarity around AGR dues payment timelines – may boost investor confidence.

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