Apex court tells Vodafone to deal with Income Tax department

January 23rd, 2009 - 11:31 pm ICT by IANS  

New Delhi, Jan 23 (IANS) The Supreme Court Friday asked global telecom giant Vodafone to respond to an Income Tax notice demanding $2 billion tax for acquiring stakes in global telecom major Hutchison that had resulted in its acquisition of telecom service provider Hutch Essar.A bench of Justice S.B. Sinha and Justice M.K. Sharma Friday asked the Netherlands-based telecom giant to first respond to the Income Tax notice at the office of Assistant Director, Income Tax, at Mumbai.

Vodafone had come to the Supreme Court challenging a Bombay High Court ruling, which had Dec 3 last year dismissed a petition by Vodafone International Holdings against the Income Tax notice.

In its lawsuit before the apex court, Vodafone has raised a legal question as to whether the acquisition of a foreign company by another foreign firm outside India, which eventually results in indirect acquisition of an Indian firm, makes the foreign firm liable to pay Income Tax in India.

Vodafone had bought 67 percent stake in Hutchison Essar from Hutchison Telecom International (HTIL) in February 2007 by paying $11.2 billion.

The I-T department had asked the telecom major to pay $1.7 billion as capital gains tax for its acquisition in Hutchison Essar (now Vodafone Essar) in its showcause notice on Sep 19, 2007.

Vodafone moved the Bombay High Court alleging that the tax department had no jurisdiction over a deal between two parties incorporated overseas.

Vodafone had also contended that it had not directly acquired the shares of the India-incorporated Hutch-Essar.

The high court in its Dec 3 ruling said that Vodafone’s petition totally lacked “particulars as to the nature of agreement dated on February 11, 2007, and all other agreements preceding or following the same, entered into by Hutchison Telecommunications International (HTIL) and the petitioner (Vodafone International).

“The essential facts, supported by the necessary documents, have been conveniently kept away from this court,” the high court ruled.

The Bombay High Court, however, had given Vodafone eight weeks to file an appeal in the Supreme Court and had continued its earlier stay asking the tax department not to proceed against Vodafone.

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