INDIA BUSINESS WORLD - NOVEMBER 16th - NOVEMBER 30th
- 2007
NOTICE TO VODAFONE
In the case of the Hutch-Vodafone deal, a showcause notice has been served on Vodafone Essar, asking why the company should not be treated as an agent of Vodafone under the I-T Act. After this, Vodafone Essar had moved the Bombay High Court for quashing the notice.
In the case of Hutchison, the company took a stand that since the transfer of shares had taken place outside India between two nonresidents, the Indian tax authorities could not levy capital gains tax.
According to Vodafone Essar, the shares were transferred directly from Hutchison International via CGP Investment (Holdings), which is incorporated in the Cayman Islands, to Vodafone. Besides, the companies that control Hutchison Essar (HEL) are based in Mauritius, which has a double taxation avoidance agreement (DTAA) with India.
The Bombay High Court, which was hearing the case of Vodafone International, had made a curious observation on this issue. The division Bench comprising Justice FI Rebello and Justice Deodhar observed that the deal, as claimed by Vodafone International, was not a simple case of transfer of shares between two foreign companies. It pointed out that the sale of shares was with the approval of FIPB, which was subject to compliance with Indian laws and regulations, including tax laws.
The high court made this observation during the hearing of the petition filed by Vodafone International, the Netherlands, against whom the I-T department sent a notice for its failure to deduct tax while making payment to Hutchison Telecom International, Hong Kong, for acquiring 67% interest in Vodafone Essar.
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