Vodafone files plaint in HC over tax demand in India
15 Oct 2010
Vodafone Group Plc said today that it has filed a petition in the Bombay high court against the Indian tax department in the long-running tax case relating to its 2007 purchase of a majority stake in Hutchison Wampoa's majority stake in its Indian joint venture with Essar.
The authorities had sought payment of tax by Vodafone International Holdings BV, a wholly owned unit of Vodafone Group, saying the company failed to withhold tax on behalf of the government while paying $11.2 billion to buy Hutchison Whampoa Ltd's 67 per cent stake in Hutchison Essar Ltd.
In a communication to the media, a Vodafone Group spokesman said the tax department has now initiated a different process, "treating Vodafone as an agent of the seller." The income tax department had earlier pursued the argument that Vodafone had failed to withhold the tax," the note added.
Vodafone argued that it wasn't liable to pay tax as the deal was made between two foreign-registered companies on foreign soil.
Vodafone is fighting a tax bill in India, which tax authorities say is more than Rs12,000 crore, including interest on the $11.1 billion deal.
Tax authorities have said Vodafone's deal was liable for tax because most of the assets were based in India and buyers must withhold capital gains tax liabilities and pay them to the government. Vodafone says Indian law does not require it to deduct tax and that the tax is usually paid by the seller.
In its statement today, Vodafone said the tax office has now initiated a "different process", treating Vodafone as an agent of the seller. It termed this as an "unusual development".
Vodafone has appealed to the Supreme Court over the tax authorities' jurisdiction to tax the deal, after the Bombay high court dismissed its petition and ruled that the tax office had jurisdiction.
"Vodafone contends that the key issue of jurisdiction (as to whether the Indian tax office can tax the transfer of a foreign company's shares between two non-residents) is currently under appeal to the Supreme Court of India," the company said in Friday's statement. "Hence any action which seeks to treat Vodafone as an 'agent' of Hutchison is misguided and premature."
