New Delhi: The finance ministry has identified several deals apart from the Vodafone-Hutchison transaction that will come within the tax net after the retrospective amendments introduced in this year’s budget are approved, a top finance ministry official said.
These deals, including the Vodafone transaction, are not covered under any double tax-avoidance treaties (DTAA) that India has with other countries and are likely to yield the government revenue of around Rs 35,000-40,000 crore.
The move aims to target companies that take money out of their Indian subsidiaries in tax-efficient ways or that have acquired an Indian company or an Indian asset.
“There are around 10 companies apart from Vodafone which would be impacted by retrospective clarificatory amendment,” said the official who didn’t want to be named. “We will raise tax due from them soon.”
According to the official, these deals include Euro Pacific Security Ltd’s purchase of a 22% stake held by Essar’s Mauritius arm in Vodafone Essar; Accenture Services transaction related to its nearly 100% holding in Accenture India through Mauritius-registered entity Beaumont Development Centre Holdings; Sab Miller’s purchase of the Indian assets of Foster’s Australia; Sanofi Pasteur Holdings’ acquisition of Shantha Biotech from another French firm; Tata Industries’ deal involving AT&T’s stake in the company that is now Idea Cellular Ltd; the Sesa Goa transaction involving the purchase of Cairn UK’s stake in Cairn India; and Cyprus-based Richter Holdings Ltd, along with Mauritian company West Globe Ltd, acquiring the holding of UK-registered Finsider International Co., which held a 51% stake in Sesa Goa.
NDTV reported that Euro Pacific Security and Pan Asia, one of the companies mentioned by the official, have already paid taxes as per the income tax department’s demand. It cited a ministry official who wasn’t identified.
A Tata spokesperson said the matter was sub judice and declined to comment. A Sanofi spokesperson said the company is reviewing “the latest developments in the Indian tax law. It is too early for us to make any further comment at this stage”. Mint wasn’t able to reach the other companies on the list late on Wednesday.
Earlier this month, finance minister Pranab Mukherjee had clarified that retrospective amendments to the Income Tax Act in the budget would not override the provisions of the DTAA that India has with 82 countries. Mukherjee had added that retrospective clarificatory amendments would not be used to reopen cases in which assessment orders have been finalized before 1 April of this year.
On the Vodafone arbitration notice sent to the Indian government, the official said the government has replied to the company stating that the notice was premature.
“We have replied to Vodafone that there is no cause of action because no law has been amended,” the official said. “It is premature on behalf of Vodafone.”
On 18 April, Vodafone, through its Dutch subsidiary Vodafone International Holdings BV, sent the letter of dispute to the Indian government as the first step to initiate international arbitration proceedings under the bilateral investment protection agreement (BIPA) signed by the Netherlands and India. The government had set up an inter-ministerial group to finalise the government’s response.
Vodafone International Holdings BV bought the Indian business operations of Hutchison Telecommunications International Ltd (HTIL) through the sale of a Cayman Islands-based firm called CGP Investments (Holdings) Ltd, a unit of HTIL, also incorporated in the Cayman Islands. The tax department estimated the phone company’s tax liability at more than Rs 11,000 crore. Vodafone and the Indian tax authorities went to court to resolve the issue.
In a 20 January verdict, the Supreme Court ruled in favour of the telecom company, saying the tax department did not have the jurisdiction to tax the transaction.
Following the judgement, the government brought in a retrospective amendment to bring similar transactions under the tax net.
PTI contributed to this story.