SC order on Tax issue: Will Vodafone continue to help Indian telecom customers?

Telecom Lead India: The Supreme Court has dismissed
Center’s petition seeking review of Vodafone tax judgment. However, Vodafone
will not be free from the bugging Income Tax issue as the Government is
targeting the mobile major again with the recent recommendations in the budget
to re-open the tax issue.

India government had sought the review of the January 20,
2012 judgment of the apex court quashing the I-T department’s decision to levy
Rs 11,000 crore capital gains tax on Vodafone for acquiring Hutchinson’s mobile
telecom business in India through an offshore deal.

The three-judge bench headed by Chief Justice SH Kapadia
conceded the Centre’s review petition, which had presented 121 grounds for
reconsideration in chamber, and said there was no merit in the government’s
plea to review the quashing of the Income Tax department’s decision to levy Rs
11,000 crore capital gains tax on Vodafone plc for acquiring Hutchinson’s Indian
telecom business through an offshore deal.

This relief is temporary as the government has proposed
retrospective amendment to the Income-Tax law to tax this transaction. However,
the jury is not out yet. It is not an open and shut case. Matter will be
litigated,” said Hemant Joshi, partner, Deloitte Haskins & Sells.


Telecom Budget 2012: Vodafone tax issue may be re-opened

Recently, Economic Times reported that Vodafone tax issue
may be re-opened by the government, as the Union Budget 2012 clarified the
definitions of property and transfer. These two words affected the tax
department’s jurisdiction on the Vodafone-Hutch transaction.

The recently announced Finance Bill said property is defined
and included any rights in or in relation to an Indian company; transfer is
defined as disposing of or parting with an asset or any interest in

The taxability of the indirect transfers has unfolded
through retrospective amendments in the provisions codifying the source base
taxation, which will impact the cross border transactions and the debate will
again knock the doors of the Court.

Vodafone verdict in $2.2 billion tax case

Recently, Vodafone won the $2.2 billion tax case
against the income tax department. Supreme Court Chief Justice S.H. Kapadia
recently ruled that the tax department has no jurisdiction over Vodafone’s
purchase of mobile assets in India.

The Indian authorities said the deal was liable for tax
because most of the assets were based in India and because under local tax law,
buyers have to withhold capital gains tax liabilities and pay them to the

Vodafone, fighting the tax bill over its $11 billion deal to
buy Hutchison Whampoa’s Indian mobile business in 2007, had appealed to the
Supreme Court after losing the case in the Bombay High Court in 2010.

The Vodafone case is reaching a point where investment
sentiment can shatter. It is time for Indian government to pro-actively prepare
for regulations. India cannot frame a guideline now in order to book a profit /
revenue from a project which was done two years ago.

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