By Prasanta Sahu And R. Jai Krishna
NEW DELHI -- In a sign the country's new government may be
following through on its pledge to rein in heavy-handed tax
authorities, government officials said Thursday that they may not
appeal the recent large tax cases India has lost against Vodafone
Group PLC and Royal Dutch Shell PLC.
In separate but similar cases, the Bombay High Court recently
ruled that neither Vodafone nor Shell would have to pay more taxes
on money paid for the a transfer of share of their Indian
subsidiaries.
The government isn't interested in keeping the matters under
litigation for long, and is unlikely to appeal to a higher court,
officials told The Wall Street Journal.
"The Government will abide by the high court decision," a senior
finance ministry official said.
This government is eager to promote ease of doing business in
India, the official said.
Confusing and sometimes conflicting tax regulations and
unpredictable enforcement of them are among the biggest reasons
India doesn't attract as much investment as China and some other
Asian economies, international executives say.
Prime Minister Narendra Modi won national elections in May after
campaign pledges to make it easier to do business in India. His
finance minister, Arun Jaitley, has vowed to end what he dubbed
"tax terrorism."
Mr. Modi is trying to trigger a wave of investment in Asia's
third-largest economy through his "Make in India" campaign, but
executives say they want more proof he will make tax collection
more fair and predictable before they invest billions in India.
Vodafone and Indian tax authorities have been locked in two tax
huge tax cases for years. A court in Mumbai ruled in favor of
Vodafone in one of its cases earlier this month.
The Mumbai court last month rejected the authorities' claims
that Vodafone priced the sale of shares in its Indian companies to
other arms of Vodafone in a way to avoid taxes. Tax authorities had
been seeking more than $500 million.
India has 90 days from the Oct. 10, high-court ruling, to appeal
the Vodafone decision. That would mean it has until Jan. 10.
Shell won a similar case earlier this month, in which the court
rejected tax officials claims that Shell mischaracterized a 2009
share transfer from its Indian unit to the parent to avoid taxes on
more than $2.5 billion that India says should be considered income.
Shell said it valued the deal properly.
Vodafone officials weren't immediately available for comment. A
spokesman of Royal Dutch Shell in India declined to comment.
Saurabh Chaturvedi contributed to this article.
Write to Prasanta Sahu at prasanta.sahu@wsj.com and R. Jai
Krishna at krishna.jai@wsj.com
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