Government’s plea for Vodafone verdict review dismissed (Lead)

March 20th, 2012 - 7:13 pm ICT by IANS  

New Delhi, March 20 (IANS) In a setback for the government, the Supreme Court Tuesday dismissed its plea seeking a review of its verdict quashing the income tax order asking telecom giant Vodafone to pay Rs.11,218 crore ($2.2 billion) tax for acquiring a 67 percent stake in Indian telecom services major Hutch Essar.

A bench of Chief Justice S.H. Kapadia, Justice K.S. Radhakrishnan and Justice Swatanter Kumar dismissed the government’s plea after considering it in their chamber.

Indian tax authorities Friday filed a review petition in the apex court on its verdict in the tax dispute favouring the telecom service provider.

The case involved a levy on a 2007 transaction in which Vodafone Plc paid had $11.2 billion to Hong Kong-based Hutchison for acquiring a 67 percent stake in Indian telecom services major Hutch Essar.

The Supreme Court last month had ruled in favour of Vodafone saying that Indian tax officials did not have jurisdiction over a deal between two global companies even if assets involved in that deal were located in India.

In its judgment Jan 20, it had set aside an earlier Bombay High Court order that had upheld the tax demand by income tax authorities on account of the said acquisition.

The finance ministry in its review petition criticised the Jan 20 judgment for saying that the transaction between Vodafone Plc and Hong Kong-based Hutchison was a bonafide FDI investment in the country.

The review petition contended that there was no inflow of the foreign investment in the country in the said transaction.

It said that by its very nature, the transaction was off shore and described the apex court finding as patently and inherently flawed. The review petition said that entire matter was unrelated to FDI as there was no component of inflow of investment.

Holding as totally inconsequential that group contributed Rs. 20,0000 crore as direct and indirect taxes, the review petition had said that the taxes paid by the domestic users was totally unrelated to the core of the matter - that is the tax liability arising from the overseas transaction relating to Indian operations of Hutch Essar.

It had sought the setting aside of Jan 20 judgment on the ground of non-consideration of the 15 contentions raised by it.

The review petition had said that judgment has not appreciated the various clauses of the sale purchase agreement (SPA) which clearly demonstrated that it was the transfer of HTIL’s property rights in HEL in pursuance to SPA.

“The SPA was a document which recorded the true intention of the partis to transfer control of HEL from HTIL to Vodafone and that SPA resulted in an extinguishment of property rights pertaining to HEL by HTIL in favour of VIH,” the review petition had contended.

Vodafone had appealed against the 2008 high court verdict, arguing that India could not impose taxes because the transaction was made between non-Indian companies outside the country.

The deal was between Vodafone International Holdings BV, a Dutch subsidiary of the British firm and CGP Investments., a Cayman Islands company which held the Indian telecom assets of Hutchison.

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