COAI clarifies on chief’s comment on Vodafone tax case

The Cellular Operators’ Association of India, representing the interests of the major telecom operators of India including Bharti Airtel and Vodafone, has issued a clarification that it is not in favor of the Government trying to override Supreme Court decisions by making laws that would apply to periods before they were made.

The clarification was made after the COAI chief Rajan Mathews said that he personally saw nothing wrong in the so-called retrospective laws.

“COAI wishes to clarify that it does not believe that it is appropriate for the government to seek to override a judicial ruling (especially by the Hon’ble Supreme Court ruling) through a retrospective change to the tax laws,” the association said.

The government of India has been slammed left, right and centre for trying to overturn a Supreme Court judgment that said that under the current Indian laws, overseas transactions cannot be taxed in India. Vodafone had bought a foreign-based company from a foreign-based owner six years ago for about $11 billion.

The Indian government slapped a $2 billion capital gains tax on the seller, and as the seller was based abroad, on Vodafone India.

Having seen its case thrown out by the highest court of the land, the Government is trying to put in a new law with “retrospective effect” that would have made the transaction taxable in India six years ago. However, the decision has been widely decried as a betrayal of trust by companies that invested in India when no such law was in effect.

“COAI believes that as a general principle, the legislature ought to provide for continuity, consistency and predictability in matters of legislation and law. This would mean that investors and taxpayers ought to be able to rely on the law in effect when the business transaction took place else the interests of investors will not be safeguarded thus leading to an inherent lack of trust in Indian policies by the investors.

“COAI further wishes to emphasize that it firmly believes, that India, especially the mobile communications industry, continues to be an attractive investment destination for both foreign and domestic investors and that the Indian system, comprising the Government, the Regulator and a strong and independent judiciary, will provide adequate checks and balances to ensure that the legitimate interests of investors are fully safeguarded,” the organization added.

In a debate titled, “Is the Indian Story Over?”, carried by NDTV Profit and aired on Saturday evening, April 14, 2012, Rajan S. Mathews, director general of Cellular Operators Association of India, had given an opinion that it was not unconstitutional for the legislature to make retroactive clarifications to the tax law.

It appears that the general comments of Rajan S. Mathews on the rights of the government during the debate, may have been interpreted to mean that COAI supports the decision of the Indian government to retroactively clarify the tax laws in order to make the Vodafone transaction now taxable in India.