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Indian Tax Office Changes Tack In Vodafone Row

by Mary Swire, Tax-News.com, Hong Kong

20 October 2010


Vodafone International BV has petitioned the Bombay High Court to defend itself against a new course of action now being taken by the Indian Income Tax Department in respect of the ongoing capital gains tax claims made on it.

The Supreme Court had given the tax department a four-week period ending October 23 to set out Vodafone’s precise tax liability in the long running dispute. The tax department held Vodafone liable for capital gains tax which, it claims, should have been deducted when it bought Hutchison Whampoa’s Indian mobile phone network in 2007 in a series of offshore company purchases.

The tax department’s latest notice to Vodafone International BV as purchaser outlines a tax claim which sets the company up as a “representative assessee” or agent of the seller.

The original tax claim including interest was reported to be in the region of INR120bn (USD2.7bn), but the amount demanded may increase as a result of this new development. The exact amount claimed is expected to come to light by the time that the case is heard in the Supreme Court on October 25.

A Vodafone spokesman described the tax office’s actions as an “unusual development”, criticizing it because it ignored the imminent hearing at the Supreme Court on the jurisdiction issue. Vodafone continues to believe that it has no liability in India whatsoever. The High Court is scheduled to hear Vodafone’s petition on October 27, two days after the supreme court hearing.

TAGS: court | capital gains tax (CGT) | tax | India | interest | law | offshore | telecoms

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