IT department files review petition in Vodafone tax case
17 Feb 2012
The Income Tax department (I-T) has filed a petition in the Supreme Court to review its last month's verdict in which it had ruled that Vodafone Plc was not liable for $2.2 billion tax.
In 2007, Vodafone bought Hutchison Whampoa's stake in its Indian mobile business in a $11-billion deal and according to the tax authorities, the deal was for an asset in India and Vodafone should have withheld tax on Hutchison's capital gains and paid it to the government.
The court had asked the income tax authorities to refund Rs2,500 crore (rs2.5 billion), which it had asked Vodafone to deposit pending a ruling, with 4 per cent interest.
The petition will be evaluated by the same judicial bench that ruled on the Vodafone-Hutchison case last month, Vodafone said in a statement (See: Vodafone wins tax case in Supreme Court).
Vodafone, had argued that I-T department had no right to tax transaction between two foreign entities and even if it was so, tax should be paid by the seller not the buyer.
The tax authorities said because most of the assets were in India and because under local tax law, buyers have to withhold capital gains tax liabilities and pay them to the government, Vodafone should pay the tax to the government.
The Supreme Court had set aside the Bombay High Court's decision that had favoured the Income Tax department.
Earlier, the Bombay High Court had said the I-T Department has the jurisdiction to claim the tax as the underlying assets were in the country.
Vodafone had moved the Supreme Court against this order denying any tax liability as the deal was between two foreign entities and was transacted offshore.
Vodafone had appealed against the Indian tax authorities' claim of Rs2,500 crorein taxes but lost in the Bombay High Court in 2008 and the Supreme Court in January 2009, which referred the case back to the Bombay High Court.
The Bombay High court decided in 2010 that the Indian tax authorities were correct in assessing Vodafone for tax in India against which Vodafone made appeal to the Supreme Court.