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Vodafone supreme court verdict.

20 January 2012

Dear Friends.

Hope you read the Vodafone case, which is a big blow to Indian Tax Department!! If not Please read it in news papers/google.

https://timesofindia.indiatimes.com/business/india-business/Vodafone-Hutchison-deal-Vodafone-wins-Rs-11000-crore-tax-case/articleshow/11566027.cms

I am sure this will be a forthcoming question in CA/CS/CWA Question Papers.

Just wanted to know how you understood it and what are your thoughts.

Cheers!!!!!!!!!!!!

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2 Replies

Sunil (Internal Auditor) (334 Points)
Replied 20 January 2012

Here Supreme court judgment is "Vodafone has no obligation under section 163 clause 1 (c) of Income Tax Act,"

Under the clause it is specified that Agent in relation to non resident includes

any person in India,

from whom the non resident in receipt of any income whether directly or indirectly.

The Transaction was between Hutchison Essar Ltd Hongknog based company and Vodafone International Holdings a British company through companies based in Nether land and Clayman Island by transfer of shares. It was a share transfer between the two entities incorporated outside India. Bombay High court admitted the view of Income Tax Department that the true intention of such a transfer which undertook outside India is to take controlling interest in the Indian operations and so the transaction has nexus with India as the underlying asset is in India and demand for capital gain tax.

But from the facts we can see that the money which generated by Vodafone International Holdings out side India is used for purchasing the shares of a company which is incorporated out side India and thereby getting controlling interest in the Indian operations. So it cannot be correlated with income generation in India. The provisions of Act is also not capable of bringing such transaction to the tax net. So in my view SC decision is a glorious one and will strengthen the integrity of our judiciary and will also an eye opener for IT department.

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