The Minister of State for Finance SS Palanimanikam has said the income tax department will take appropriate action in the Vodafone tax dispute.

"The assessing officer, as a quasi-judicial authority, will take appropriate action in the light of the Supreme Court judgment and Section 119 of the Finance Act, 2012," Palanimanikam told the Rajya Sabha last week in a written reply to a query.

The section 119 of the Finance Act, 2012 allows tax authorities to validate its previous tax demands or notices. Though the amendment came into effect soon after Presidential assent to the Finance Act 2012, the tax authorities are yet to take any action in the Vodafone case.

Vodafone has challenged the retrospective amendment to the Act under India-Netherlands Bilateral Investment Promotion Agreement.

The government, however, has ordered a review of the retrospective provision that said the deals executed overseas that resulted in indirect transfers of Indian assets were taxable in India.

The amendment negated the Supreme Court ruling that had set aside Rs 11,218 crore tax demand slapped on Vodafone by income-tax department for its acquisition of a majority stake in Hutch India in 2007.

According to Economic Times, the IT department had on October 22, 2010 passed an order determining a tax liability (including interest) of Rs 11,218 crore on the company and also ordered a penalty of Rs 7,900 crore in April, 2011.

The penalty demand was not enforced in view of a Supreme Court'''s direction dated April 15, 2011, Palanimanickam said.