The Cabinet is now likely to soon take up the case as the Law Ministry has concurred with the Finance Ministry's proposal to withdraw from conciliation.
"The I-T Department may proceed as per the provisions of the Income Tax Act to collect the outstanding demand from the company," the Law Ministry said in its comment on the new Cabinet note.
Vodafone declined to comment on the issue.
The Cabinet had in June 2013, given a go-ahead to the Finance Ministry to start a non-binding conciliation talks with Vodafone to resolve the capital gains tax dispute related to its acquisition of Hutchison Whampoa's stake in Hutchison Essar in 2007.
Although the Finance Ministry was keen on an amicable solution to the long-pending tax dispute, dilly-dallying by the company led to the collapse of the talks.
According to sources, Vodafone wanted to club a Rs 3,700 crore transfer-pricing case of Vodafone India Services with the capital gains tax issue, a demand that could not be accepted by the Finance Ministry.
As the matter is pending in Bombay High Court and Government of India is being represented by the Finance Ministry, the issue could not be included as part of the conciliation talks, sources said.
The Supreme Court had ruled in Vodafone's favour in 2012, saying it was not liable to pay any tax over the acquisition of assets in India from Hong Kong-based Hutchison.
The government, later in 2012, changed the rules to enable it to make retrospective tax claims on concluded deals.
Latest Business News
