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I-T dept to issue Rs 12K cr tax notice to Vodafone

Posted on 28 September 2010,    
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I-T dept to issue Rs 12K cr tax notice to Vodafone

 

The I-T department has said it will raise a tax demand of over Rs 12,000 crore to Vodafone over its USD 11-billion deal with Hutch following a Supreme Court directive to decide the amount to be paid by the UK-based company within four weeks.

 

The income tax department (I-T) also asserted that its action will not hurt the flow of foreign investments into the country.

 

"We will be raising tax demand on Vodafone within four weeks," Central Board of Direct Taxes (CBDT) Chairman S S N Moorthy told reporters in New Delhi on Monday.

 

 

Meanwhile, Vodafone stuck to its position that it does not have a tax liability in the deal as it did not make any capital gains.

 

 

"We firmly believe that this transaction is not subject to tax in India. Furthermore, as Vodafone is the acquiring company, we have clearly not made any capital gain on the sale. We will continue to take whatever actions necessary to defend Vodafone's position as the matter proceeds," Vodafone said in a statement on Monday.

 

 

Moorthy said one month is given to a taxpayer to pay tax, after the issue of a tax notice.

 

 

He also said other cross-border deals are under the scanner of the department, but refused to name them.

 

 

Earlier in the day, the Supreme Court refused to stay the high court order, which has ruled that Indian income tax authorities have jurisdiction to tax Vodafone on its deal with Hutch.

 

 

The court issued notices to the tax authorities directing them to decide within four weeks the liabilities of Vodafone.

 

 

The court has scheduled the next hearing on the matter on 25th October and said on the basis of this order; liberty was given to the petitioner (Vodafone) to approach the court for an appropriate remedy.

 

 

When asked what will be the liabilities, Moorthy said it will be almost over Rs 12,000 crore, including interest on tax.

 

 

He said apprehensions that such an action will hurt foreign investments into the country stands belied.

 

 

"Apprehensions have been expressed in different quarters regarding the impact of such action of the Income Tax Department on foreign investment in India. The ruling, coupled with earlier rulings of the Bombay High Court, proved that Income Tax authorities in India have acted lawfully.

 

 

"This, together with the fact that India has received the highest ever foreign direct investment in the current fiscal, belies that apprehension," he said.

 

 

India has received over 19 billion dollar foreign investment, including 5.87 billion dollar FDI and 13.33 billion dollar FII, as per the latest figures.

 

 

Moorthy said that the income tax administration in India is transparent and friendly to the taxpayers and investors.

 

 

"There are multiple channels, both legal and administrative to address investor and taxpayer queries and grievances. The international investing community is free to explore these opportunities for an informed decision on investing in India," he said.

 

 

To a query whether the department will apportion Indian assets for computing tax liability and not overseas assets, Moorthy said he is not aware of apportionment in the order and will go by the law.

 

 

When asked whether Vodafone will be allowed to pay tax in tranches, he said the issue will come up at later stage.

SC refuses to stay HC verdict on tax demand from Vodafone

 

The Supreme Court on Monday refused to offer any immediate relief to Vodafone, which has challenged the Bombay High Court order allowing the government to tax the company's USD 11 billion deal with Hutch.

 

The tax department had raised a demand for Rs 12,000 crore as tax on the 2007 deal.

 

While refusing to stay the high court order, the apex court issued notices to the tax authorities directing them to decide within four weeks the liabilities of Vodafone.

 

"Pending the hearing and further orders, we direct the TDS officer to decide within four weeks from today on the tax liability," a bench headed by Chief Justice S H Kapadia said while issuing a notice to the I-T Department.

 

However, the bench refused the plea of Vodafone's counsel and senior advocate Harish Salve seeking a stay on the High Court's judgment, saying that it would have to deposit a part of the tax demand amount first.

 

"If you want a stay on the High Court judgment... You have to pay part of the amount. The choice is yours," the bench said while asking the counsel not to press for the stay.

 

The court has scheduled the next hearing on the matter on 25th October and said on the basis of this order, liberty was given to the petitioner (Vodafone) to approach the court for an appropriate remedy.

 

Attorney General G Vahanvati, appearing on behalf of the government, said the department will pass an order within four weeks determining the liability of the telecom major.

 

Vahanvati contended that the court could only pass an order staying the judgment if the telecom major deposited 50 per cent of its liability.

 



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