Vodafone files petition against tax authorities move

Friday, October 15, 2010

NEW DELHI - Telecom service provider Vodafone Friday said it has filed a petition in the Bombay High Court against the Indian tax department’s move to classify it as an agent of the seller in the 2007 sale of Hutchinson Essar.

Vodafone had bought 67 percent stake sold by Huctchinson Whampoa, the foreign partner of the mobile company, for $11 billion and has been embroiled in a dispute with tax authorities who are claiming $2.6 billion from the Britain-based global mobile major.

The tax authorities have contended that the Vodafone deal was liable to be taxed for capital gains, since the assets of the acquired company were based primarily in India.

“Having pursued one line of argument in seeking tax from Vodafone through alleging failure to withhold tax; the Tax Office has now initiated a different process - treating Vodafone as an ‘agent’ of the seller,” the company said in a statement.

“Vodafone contends that the key issue of jurisdiction (as to whether the Indian tax office can tax the transfer of a foreign company’s shares between two non-residents) is currently under appeal to the Supreme Court of India. Hence any action which seeks to treat Vodafone as an ‘agent’ of Hutchison is misguided and premature,” it added.

The Bombay High Court had held up the tax department’s claim, following which Vodafone filed an appeal in the Supreme Court.

However, the apex court Sep 27 did not grant any relief to Vodafone and asked the tax authorities to determine the extent of Vodafone’s liabilities within four weeks.

The Supreme Court bench headed by Chief Justice S.H. Kapadia had said if the company wanted a stay on the High Court order it would have to pay part of the liability first.

Vodafone though still maintains that the transaction is not subject to tax in India as it is the acquiring company and they did not make any capital gain on the sale.

“Vodafone continues to believe that it has no tax liability whatsoever on this transaction and we look forward to this matter being thoroughly reviewed by the Supreme Court,” said a Vodafone Group Plc spokesperson.

Filed under: Court, Immigration

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