Cabinet approves conciliation to resolve Vodafone tax row

New Delhi: In a bid to break the stalemate on the Vodafone tax issue, the Cabinet on Tuesday approved a proposal for non-binding conciliation with the British telephone major, the outcome of which will have to be ultimately approved by Parliament. "We have just accepted a proposal for a non-binding conciliation. If the outcome is acceptable to the government then it will go Cabinet and thereafter to Parliament for approval," Finance Minister P Chidambaram said after the Cabinet meeting.

Vodafone has been involved in a Rs 11,200 crore tax dispute for the purchase of Hutchison's stake in Hutchison Essar in 2007. Chidambaram said that there is no timeline for the conciliation and the government would communicate it to Vodafone in a day or two. He made it clear that the proposal is for conciliation under the Arbitration and Conciliation Act and said it was not arbitration.

"Two conciliators will sit together and they would come out with an outcome. It is not an arbitration. They will suggest an outcome, a modified outcome and it is a step by step approach. Everything is in public domain," he said. Chidambaram said it is in India's interest to resolve the case through the process of conciliation and not in an arbitrary manner. "Ultimately, the final word will be that of Parliament. It is a non-binding conciliation," he said.

"Let's see what the outcome is," Chidambaram said in reply to repeated questions on what would happen if one of the sides does not agree to it. The Union Minister said what the Cabinet has done on Tuesday was strictly in accordance with the Parthasarathi Shome committee's recommendations which had suggested that past disputes should be resolved through conciliation and not through retrospective amendments to tax laws.

When a questioner suggested that the government's decision on Tuesday was not in conformity with Committee's recommendations, he said, probably the reporter had not read the relevant paragraph properly. "The committee has said that there should be no retrospective legislation in tax matters," Chidambaram said.