British telecom giant Vodafone has decided against making a provision in its balance-sheet for the over Rs.11,000 crore tax claim made by Indian authorities for its 2007 deal to acquire stake in Hutchison-Essar.
“The group did not carry a provision for the litigation or in respect of the retrospective legislation at September 30, 2012, or at previous reporting dates,” Vodafone Group said in its first-half financial results filing.
The Income-tax Department had raised a Rs.11,218 crore tax demand (including Rs.7,900 crore tax demand and the remaining interest) from Vodafone for its acquisition of Hutchison stake in Hutchison-Essar in 2007 through a deal in Cayman islands. But the Supreme Court struck down the tax claim.
Following the Supreme Court judgment, the government in the Finance Bill, 2012, proposed amendments to the Income-tax Act, 1961, with retrospective effect to bring under tax net overseas mergers and acquisitions involving Indian assets.
In April 2012, a Dutch subsidiary of U.K.-based Vodafone served a ‘dispute notice’ to the Indian government, threatening international arbitration under the Bilateral Investment Treaty (BIT).
The group said it was also confident of making a successful claim under the Dutch-India Bilateral Investment Treaty in case it received any further tax demands.
“Should further demand for taxation be received by Vodafone International Holdings BV (VIHBV) or any member of the Group as a result of the new retrospective legislation, the Group believes it is probable that it will be able to make a successful claim under the BIT, which will not result in an outflow of economic benefits from the Group,” it said.
The company, on Wednesday, said its revenue had grown 13.3 per cent to Rs.17,580 crore for the six months ended September 30, 2012, from Rs.15,510 crore in the same period last year.
The company did not disclose the profit numbers for the first-half of 2012-13.
“We achieved a revenue growth of 13.3 per cent. We have been able to improve our operational profit margin to 28.4 per cent as a result of our increasing operating efficiency based on scale and lower customer acquisition cost,” Vodafone India Managing Director and CEO Marten Pieters told reporters here.
The revenue growth had been impacted by some of the regulatory measures. However, lower customer acquisition cost had been a positive for the finances of the industry, he said.
