Vodafone tax case may delay India-Canada investment protection pact

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Indian government is reviewing all foreign investment deals in wake of tax dispute with mobile operator.

A foreign investment protection deal between India and Canada–which was expected to be signed this week, according to media reports–is likely to be delayed because New Delhi is reviewing all similar agreements after its tax dispute with Vodafone Group PLC, Reuters news agency reported Sunday, citing Canada’s high commissioner in India, Stewart Beck.

India is involved in a long-standing tax case with U.K.-based Vodafone over the company’s 2007 purchase of a majority stake in an Indian company from Hutchison Whampoa Ltd.

The government asked Vodafone to pay tax that local authorities say the company should have deducted from its payments to Hutchison. Vodafone says the transaction was between two foreign companies and therefore can’t be taxed in India.

India’s Supreme Court agreed with Vodafone’s arguments earlier this year. But the government amended a tax law, which gave local authorities the power to tax Vodafone-like deals, and that too retrospectively. Vodafone has since threatened to initiate proceedings against India under a bilateral investment-protection treaty.

Reuters also cited Mr. Beck as saying the two countries have a disagreement in negotiations to open up of Canada’s uranium exports to India.

Mr. Harper is in India on a six-day visit that began Sunday.

The high commission’s spokeswoman didn’t offer any immediate comments.