CONTINUEThis site uses cookies. By continuing to browse this site you are agreeing to our use of cookies. Find out more.
  1. Front Page
  2. News By Topic
  3. Vodafone Loses In Mumbai High Court

Vodafone Loses In Mumbai High Court

by Mary Swire,, Hong Kong

13 September 2010

UK telecoms giant Vodafone has expressed continuing confidence that it is not liable for Indian capital gains tax from its purchase of the Indian mobile phone network Hutchison Essar in 2007 despite a setback in the Mumbai High Court.

The Mumbai High Court ruled that the Indian tax authorities did have jurisdiction to impose tax on the transaction because the operating assets of the company under sale were in India. Vodafone’s counsel has announced that the company is to make an appeal to India’s highest judicial body, the Supreme Court in New Delhi.

Vodafone is being chased for over USD2bn in unpaid capital gains taxes relating to its USD11bn purchase of Indian operator Hutchison Essar from Hong Kong based Hutchison Telecommunications International Ltd (HTIL) in 2007.

Vodafone argued that it was the buyer, and the capital gains tax liability should be assessed against the seller HTIL, and further claimed that since the sale took place between foreign entities no tax liability should have been incurred in India. The Vodafone/Essar deal was structured so that Vodafone International Holdings, a Dutch-registered subsidiary of Vodafone Group, paid USD11bn to a Cayman Islands-registered subsidiary of HTIL, in order to acquire a 52% stake in Hutchinson Essar and a further 15% was acquired from two Indian shareholders. Commentators are speculating from wording in the judgement that the 15% stake may have to be considered separately from the 52% stake.

The developments are being watched carefully as similar capital gains tax claims affecting offshore transactions are in the pipeline for which the Vodafone case will act as precedent. These include the sale in 2004 of General Electric’s outsourcing company, Genpact India.

TAGS: court | capital gains tax (CGT) | tax | business | holding company | India | Netherlands | law | Cayman Islands | group taxation | offshore | multinationals | telecoms | triangulation

To see today's news, click here.


Tax-News Reviews

Cyprus Review

A review and forecast of Cyprus's international business, legal and investment climate.

Visit Cyprus Review »

Malta Review

A review and forecast of Malta's international business, legal and investment climate.

Visit Malta Review »

Jersey Review

A review and forecast of Jersey's international business, legal and investment climate.

Visit Jersey Review »

Budget Review

A review of the latest budget news and government financial statements from around the world.

Visit Budget Review »

Stay Updated

Please enter your email address to join the mailing list. View previous newsletters.

By subscribing to our newsletter service, you agree to our Terms and Conditions and Privacy Policy.

To manage your mailing list preferences, please click here »