SC asks IT department to compute Vodafone’s exact liability

The Supreme Court, yesterday turned down a plea for a stay on the Bombay High Court order validating nearly around $2 billion capital gains tax on the $11 billion acquisition of Hutch.

by Dutch telecom giant Vodafone. The Income Tax department has been given four weeks to compute the exact tax liability of the company.

Through senior advocate Harish Salve, the mobile telephony services provider accused the I-T department of adopting a curious approach in the case said it had mistakenly termed the transfer of share capital from Hutchinson Telecommunications International Ltd (HTIL) to Vodafone as capital gains.

While Salve was arguing for a stay of the HC order before a bench of chief justice S H Kapadia and justices K S Radhakrishnan, Swanter Kumar, attorney general (AG), G E Vahanvati and solicitor general Mohan Parasarn opposing the stay submitted that if the SC was to stay the HC order, then the interest of the IT department would need to be protected.

Vahanvati said, "In the event the SC entertains the appeal and intends to grant stay, then it should ask the appellant to deposit the principal amount of Rs 8,500 crore towards capital gains tax."

The AG said the department was not demanding interest due on the principal amount, which together came to around Rs11,000 crore. Deftly deflecting repeated queries from the bench regarding deposition of part amount in lieu of stay of the HC order, Salve argued that Vodafone had a good case to show to the court that, in terms of capital gains tax the company was liable to pay little, given the transaction was only upstream transfer of shares from one company to another.