Vodafone Group Plc is not liable to pay Rs11,000 crore demanded by India's tax authorities, the Supreme Court ruled today.
The apex court set aside a Bombay High Court judgement of 2008 that Vodafone International Holdings must pay up this amount in capital gains tax after its takeover of Hutchinson's Indian holdings in 2007.
A three-judge bench headed by Chief Justice S H Kapadia held that the income tax department has "no jurisdiction" to levy tax on transactions between companies incorporated outside India.
Writing a separate judgement, Justice K S Radhakrishnan, while concurring with the findings of the chief justice and Justice Swatanter Kumar, said the companies [Vodafone and Hutchison] are incorporated outside and their transaction outside India has "no underlying nexus" with the Indian tax authority.
The court asked the IT department to return Rs2,500 crore deposited by Vodafone within two months along with 4 per cent interest.
It also asked Supreme Court registry to return within four weeks the bank guarantee of Rs8,500 crore given by the telecom major.
Vodafone, the UK-based telecom major, acquired a 67-per cent stake in what was formerly Hutchison-Essar from the Hutchison Group based in Hong Kong through companies based in the Netherlands and the Cayman Islands in May 2007 in a $11.2-billion deal (See: Vodafone pays $10.9 billion to complete Hutch deal) The judgement by the apex court comes as a victory to Vodafone-Essar; even as the marital tussles between Vodafone and Essar have become public knowledge.