SC rules in favor of Vodafone in $2.2 billion tax case

By Telecom Lead Team: Mobile major Vodafone won the $2.2 billion tax case against the income tax department.

The tax department has no
jurisdiction over Vodafone’s purchase of mobile assets in India, Supreme Court
Chief Justice S.H. Kapadia ruled on Friday, in a big relief to the telecom
giant that has been fighting a $2.2 billion tax bill in a long-running dispute
anxiously watched by foreign investors in India.

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

The world’s largest mobile operator by revenue has said it
believes Indian tax office has no right to tax the transaction between two
foreign entities, and even if any tax is to be paid, it should be paid by the
seller not the buyer.

Indian authorities have 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

According to a PTI report, the Supreme Court directed the I-T department to return
Rs 2500 crore deposited by Vodafone in compliance of its interim order
within two months.

The Supreme Court also directed its registry to return within four weeks the bank guarantee of Rs 8,500 crore given by the company.

Recently, Vodafone reportedĀ 27
percent increase in data revenue to 3.06 billion pounds in H1 2011-12 from 2.41
billion pounds in H1 2010-11. The mobile operator’s total income grew by 4
percent in H1 2011-12 at 23.52 billion pounds. Voice revenue fell to 13.36
billion pounds from 13.78 billion pounds. Growth in fixed line business was 12.5
percent at 1.8 billion pounds in H1 2011-12 against 1.6 billion pounds in H1 of
previous fiscal.

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