Govts plea for Vodafone verdict dismissed

Govts plea for Vodafone verdict dismissed

By: || Updated: 20 Mar 2012 06:46 AM


New Delhi: In a
setback for the government, the Supreme Court on Tuesday dismissed its
plea seeking a review of its verdict quashing the income tax order asking
telecom giant Vodafone to pay Rs.11,218 crore ($2.2 billion) tax for
acquiring a 67 percent stake in Indian telecom services major Hutch Essar.

A
bench of Chief Justice SH Kapadia, Justice KS Radhakrishnan and Justice
Swatanter Kumar dismissed the government's plea after considering it in
their chamber.

Indian tax authorities on Friday filed a review
petition in the apex court on its verdict in the tax dispute favouring the
telecom service provider. The case involved a levy on a 2007 transaction
in which Vodafone Plc paid had $11.2 billion to Hong Kong-based Hutchison
for acquiring a 67 percent stake in Indian telecom services major Hutch
Essar.

The Supreme Court last month had ruled in favour of
Vodafone saying that Indian tax officials did not have jurisdiction over a
deal between two global companies even if assets involved in that deal
were located in India. In its judgment Jan 20, it had set aside an earlier
Bombay High Court order that had upheld the tax demand by income tax
authorities on account of the said acquisition.

The finance
ministry in its review petition criticised the Jan 20 judgment for saying
that the transaction between Vodafone Plc and Hong Kong-based Hutchison
was a bonafide FDI investment in the country. The review petition
contended that there was no inflow of the foreign investment in the
country in the said transaction.

It said that by its very nature,
the transaction was off shore and described the apex court finding as
patently and inherently flawed. The review petition said that entire
matter was unrelated to FDI as there was no component of inflow of
investment.

Holding as totally inconsequential that group
contributed Rs. 20,0000 crore as direct and indirect taxes, the review
petition had said that the taxes paid by the domestic users was totally
unrelated to the core of the matter - that is the tax liability arising
from the overseas transaction relating to Indian operations of Hutch
Essar.

It had sought the setting aside of Jan 20 judgment on the
ground of non-consideration of the 15 contentions raised by it. The review
petition had said that judgment has not appreciated the various clauses of
the sale purchase agreement (SPA) which clearly demonstrated that it was
the transfer of HTIL's property rights in HEL in pursuance to SPA.

"The
SPA was a document which recorded the true intention of the partis to
transfer control of HEL from HTIL to Vodafone and that SPA resulted in an
extinguishment of property rights pertaining to HEL by HTIL in favour of
VIH," the review petition had contended.

Vodafone had appealed
against the 2008 high court verdict, arguing that India could not impose
taxes because the transaction was made between non-Indian companies
outside the country.

The deal was between Vodafone International
Holdings BV, a Dutch subsidiary of the British firm and CGP Investments.,
a Cayman Islands company which held the Indian telecom assets of
Hutchison.




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