I-T serves notice on Vodafone for failure to deduct tax in Hutchison deal
31 Oct 2009
The income-tax department on Friday issued a detailed show-cause notice to the Netherlands incorporated Vodafone International Holdings for "failure to deduct tax at source in the $11.2-billion deal to acquire Hutchinson Telecommunications International's Hutch Essar stake in 2007.
The I-T department asked Vodafone to explain as to why it should not be treated as a defaulter for failure to deduct tax at source in the $11.2 billion deal.
If the I-T department were to go ahead with declaring the company a defaulter, it would be liable to pay $2 billion as TDS in addition to a $2 billion penalty.
A statement issued by the Central Board of Direct Taxes has asked the to reply to the notice by 16 November. The fresh 1,901-page notice follows the Supreme Court's dismissal of the company's application questioning the I-T department's jurisdiction over a Dutch company.
Vodafone Essar, in a statement, confirmed the receipt of the notice but denied it would affect the company's position. The company said it would review the document in detail as it intends to respond to the I-T department in due course. The company said it was confident that the transaction did not attract any tax and all the taxation and legal advice it had received remained consistent with the view.
Vodafone had unsuccessfully challenged an earlier I-T notice in the Bombay high court, following which it had filed a special leave petition in the Supreme Court against the high court's decision but the apex court too had turned down the appeal. The notice served on Friday requires Vodafone International to explain its stand regarding its contention that the I-T department does not have competent jurisdiction against it in the matter of non-deduction of tax at source from the payment of $11.2 billion made on 8 May 2007.
The I- department had earlier sent two letters to Hutchinson Essar (now called Vodafone Essar) asking it to impress on Hutch Telecom International (HTIL) to pay $1.9 billion towards tax.