Apex court to hear Friday Vodafone’s suit against tax demand

January 21st, 2009 - 10:29 pm ICT by IANS  

New Delhi, Jan 21 (IANS) The Supreme Court is to hear Friday global telecom giant Vodafone’s lawsuit challenging a demand for $1.7 billion as income tax for acquiring stakes in another global telecom major Hutchison that also resulted in the company’s acquisition of Indian telecom service provider Hutch Essar.The Netherlands-based Vodafone’s suit challenges a Bombay High Court ruling justifying the income tax notice.

The Bombay High Court on Dec 3 last year had dismissed a petition by Vodafone International Holdings challenging the tax notice.

In its lawsuit in the apex court, Vodafone has raised a crucial legal question as to whether the acquisition of one foreign company by another foreign firm outside Indian shores, eventually resulting in indirect acquisition of an Indian firm, makes the foreign firm liable to pay income tax to the Indian tax authorities.

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

The I-T department had asked the telecom major to pay $1.7 billion as capital gains tax for the acquisition.

Vodafone had moved the Bombay High Court contending 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 had 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,” it had ruled.

The high court, however, had given Vodafone eight weeks to file an appeal in the Supreme Court and had extended its earlier stay asking the I-T department not to proceed against Vodafone.

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