Vodafone tried to ignore its tax liability, clarifies CBDT

The additional director of income tax (international taxation), Mumbai had, on 15 March 2007, issued the first notice in the transaction relating to sale of 66.9848 per cent stake of Hutchison Essar Ltd (HEL), the CBDT said.

The CBDT was clarifying to a news item `I-T didn't warn Vodafone of tax burden or dispute deal format' that appeared in the New Indian Express today.

The income tax department had, on 11 February 2007, asked the Indian company to submit certain details regarding the transaction, including shareholders agreements and memorandum of understanding between Hutchison Telecommunications International Ltd and Vodafone Group, the release said.

As per information available (from press releases of the parties concerned), Vodafone International Holdings BV was to acquire the entire issued share capital of CGP Investments (Holdings) Ltd, a company incorporated in Cayman Islands, indirectly from HTIL and the CBDT had in its notice clearly sought full details of the transaction, the release pointed out.

When the Indian company showed its inability to submit details, another notice was issued on 23 March 2007, in which, after quoting the press releases from HTIL and Vodafone, it was mentioned that HTIL/Hutchison Group had made substantial gains from their investment in HEL. It was also clearly mentioned that the capital gains are chargeable to tax in India.

It was further mentioned that if the parties to the transaction proposed to advance any other view, they were at liberty to approach the assessing officer. It was explained that the payer (Vodafone Group) as well as the payee (Hutchison Telecom Group) could make an application to the assessing officer under sections 195(2) and 197 of the Income-tax Act, 1961, respectively, for determining the exact tax liability resulting from the above-mentioned transaction.