The Income-tax department on Friday asked telecom major Vodafone to pay Rs.11,217.95 crore in taxes within a month for the acquisition of Hutchison's stake in its telecom joint venture with Essar in India in 2007.
“The IT department on Friday issued an order raising a tax demand of Rs.11,217.95 crore on Vodafone International Holdings BV, treating it as an assessee in default under Sec. 201(1) of the Income-tax Act, 1961, (the Act), for failure to deduct tax as required under Sec. 195 of the Act before making a payment of $11.076 billion (around Rs.55,000 crore) to Hutchinson Telecommunications International Ltd. The tax demand is to be paid within 30 days of the receipt of the notice of demand,” an official statement said.
The tax demand has been raised in pursuance to the direction of the Supreme Court dated September 27 to the Income-tax Assessing Officer to determine and quantify the tax liability of Vodafone within four weeks, it added. Notably, last month, the Supreme Court had refused to stay a High Court order, which had ruled that Indian income-tax authorities have jurisdiction to tax Vodafone on its deal with Hutchison where the former had bought the latter's 67 per cent stake for over $11 billion.
The Supreme Court has scheduled the next hearing on the matter on October 25. In the order, liberty was given to the petitioner (Vodafone) to approach the court for an appropriate remedy.
However, Vodafone again reiterated that it was not liable for any tax on the transaction relating to its acquisition of Hutchisons' stake in Hutchison Essar. “Vodafone strongly disagrees with the tax calculation released by the Indian Tax Office... It continues to believe that it is not liable for any tax on this transaction involving the transfer of a company outside of India. Further, Vodafone was the acquirer and not the vendor and has made no gain on the transaction,” a Vodafone spokesperson said in a statement. The spokesperson further said “in this test case, the tax authority is attempting to interpret Indian law as it has never been interpreted for the past 50 years, and this interpretation also goes against internationally recognised tax norms. Vodafone also said it would continue to take whatever actions necessary to defend itself in this matter.''
