After Vodafone, India changes tax rules to boost investment
India's decision to drop a tax dispute with Vodafone Group Plc is likely to mean relief for Royal Dutch Shell PLC and others caught in similar, protracted battles, as the government tries to attract much-needed foreign investment.
India's image as an investment destination has been tarnished by a reputation for red tape, unpredictable rules and a tax office long seen as over zealous in its pursuit of foreign firms. Prime Minister Narendra Modi's government, seeking to reboot a slowing economy, has sought to change that.
Late on Wednesday, the government said it would not appeal a Bombay High Court ruling in favour of Vodafone, the biggest foreign investor in India.
"It's a departure from the past when all the high-value tax cases were always litigated," said Himanshu Shekar Sinha, a partner at law firm Trilegal.
"With this, the government has sent a clear direction that appeals should not be filed routinely."
Tax lawyers said they expected cases such as those involving IBM, Nokia, Microsoft Corp and others could now be resolved instead through negotiation.
The Bombay High Court ruled in favour of Shell in November, after it challenged the largest ever claim in an Indian tax case related to transfer pricing - the value at which companies trade products, services or assets between units across borders, a regular part of doing business for a multinational.
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