Vodafone, I-T dept battle may shift to SC
Party that loses in HC to approach apex court, division bench expected to pronounce judgement after july 18.
By ET Bureau |
MUMBAI: The next battle between Vodafone International and the Income Tax (I-T) department will be fought in the Supreme Court. The party that loses in the Bombay High Court will approach the apex court, both sides confirmed to ET.
Lengthy arguments by Vodafone and the I-T department before the division bench of Justice S Radhakrishnan and Justice AV Nirgude concluded on Wednesday. The bench is expected to pronounce its judgement after July 18. The final hearing in the case, having ramifications for MNCs and cross-border transactions, had started on June 23.
The British telecom giant has been fighting against the imposition of a $2.1-billion capital gains tax on the purchase of 67% stake in Hutchison Essar from Hutchison Telecom International (HTIL) for $11.2 billion.
The division bench has asked the two parties to make written submissions in the case. While Vodafone will give its submissions by July 14, the I-T department will have to do so by July 18. After that, the bench will pronounce its judgement. The bench has not specified any date for giving its verdict. The party that loses will almost certainly approach the Supreme Court.
The I-T department, being represented by Additional Solicitor-General Mohan Parashar and counsel Beni Chatterjee, has sought a copy of the agreement between Hutchison and Vodafone. They argued that the company was liable to pay tax.
On May 16, Parliament passed an amendment to allow the government to take action against companies which do not withhold taxes when making a transaction. It also stipulates that tax has to be paid even by the buyer of shares of an Indian company.
This amendment will come into effect retrospectively from 2002. Effectively, the department is seeking capital gains tax of $2.1 billion as well as 18% interest on it as penalty for not withholding tax, taking the total claim to nearly $2.5 billion.
Appearing on behalf of Vodafone, counsel Iqbal Chagla reiterated that Vodafone has no withholding obligations in India as provisions of the I-T Act do not apply to non-residents who do not have any presence in India. While Vodafone International is based in the Netherlands, HTIL is a Cayman Islands firm.
Assuming, if tax authorities establish that the transaction is taxable in India, then they can proceed against Vodafone only if Hutch does not discharge its tax liability, he argued.
Further, the amendments to Section 191 and 201 of the Income-Tax Act in the latest Finance Bill, retrospectively seeking to hold a person who has not withheld taxes under Section 195 as an assessee in default are ���unconstitutional���.
The transaction is not taxable in India because it was for an overseas sale of shares in a foreign company. There is no business connection that would give rise to taxable income in India nor is there transfer of any capital asset or property situated in India.
Lengthy arguments by Vodafone and the I-T department before the division bench of Justice S Radhakrishnan and Justice AV Nirgude concluded on Wednesday. The bench is expected to pronounce its judgement after July 18. The final hearing in the case, having ramifications for MNCs and cross-border transactions, had started on June 23.
The British telecom giant has been fighting against the imposition of a $2.1-billion capital gains tax on the purchase of 67% stake in Hutchison Essar from Hutchison Telecom International (HTIL) for $11.2 billion.
The division bench has asked the two parties to make written submissions in the case. While Vodafone will give its submissions by July 14, the I-T department will have to do so by July 18. After that, the bench will pronounce its judgement. The bench has not specified any date for giving its verdict. The party that loses will almost certainly approach the Supreme Court.
The I-T department, being represented by Additional Solicitor-General Mohan Parashar and counsel Beni Chatterjee, has sought a copy of the agreement between Hutchison and Vodafone. They argued that the company was liable to pay tax.
On May 16, Parliament passed an amendment to allow the government to take action against companies which do not withhold taxes when making a transaction. It also stipulates that tax has to be paid even by the buyer of shares of an Indian company.
ADVERTISEMENT
This amendment will come into effect retrospectively from 2002. Effectively, the department is seeking capital gains tax of $2.1 billion as well as 18% interest on it as penalty for not withholding tax, taking the total claim to nearly $2.5 billion.
Appearing on behalf of Vodafone, counsel Iqbal Chagla reiterated that Vodafone has no withholding obligations in India as provisions of the I-T Act do not apply to non-residents who do not have any presence in India. While Vodafone International is based in the Netherlands, HTIL is a Cayman Islands firm.
Assuming, if tax authorities establish that the transaction is taxable in India, then they can proceed against Vodafone only if Hutch does not discharge its tax liability, he argued.
Further, the amendments to Section 191 and 201 of the Income-Tax Act in the latest Finance Bill, retrospectively seeking to hold a person who has not withheld taxes under Section 195 as an assessee in default are ���unconstitutional���.
ADVERTISEMENT
The transaction is not taxable in India because it was for an overseas sale of shares in a foreign company. There is no business connection that would give rise to taxable income in India nor is there transfer of any capital asset or property situated in India.
Start a SIP with as low as ₹500 with ET Money App!
Download
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
ADVERTISEMENT
