Vodafone was told of tax liability, says govt

Vodafone was told of tax liability, says govt

Remya Nair
Updated2 May 2012, 10:57 PM IST
<br /><br />

New Delhi: A day after Vodafone Group Plc chief executive officer (CEO) Vittorio Colao met finance minister Pranab Mukherjee and other finance ministry officials over the proposed retrospective changes to tax laws, the war of words between the government and the UK-based telco showed no sign of subsiding.

The tax department, in a notice issued on 23 March 2007, had informed Hutchison that the capital gains made through the transaction were chargeable to tax in India, the statement said. The transaction between Hutchison and Vodafone concluded on 8 May 2007.

“It was further mentioned that if in case parties to the transaction propose to advance any other view, they are at liberty to approach the assessing officer,” the statement said.

The finance ministry has also claimed that this advisory of the tax department issued in March 2007 was conveyed to the parties concerned, that is, to the Vodafone Group and to Hutchison Telecommunications International Ltd (HTIL). “This has been confirmed by HEL (Hutchison Essar Ltd) in writing through their letter dated 5 April 2007. It has been mentioned by HEL in the said letter that ‘we have provided copies of this letter to the concerned parties’.”

In 2007, Vodafone International Holdings BV, the UK-based telco’s Dutch subsidiary, bought the Indian business operations of 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 had held that even though the indirect transfer of shares happened overseas, the underlying assets were in India and the transaction was subject to levy of capital gains tax.

Finance secretary R.S. Gujral had, in various media interviews, said that Vodafone was informed about the tax liability before the conclusion of the transaction.

Vodafone refuted this in a statement on 24 April: “At no point before the transaction concluded and the payment was made did any entity of the Vodafone Group receive any communication at any of its business addresses from the Indian tax authorities requesting a payment of withholding tax.”

The government has proposed retrospective amendments in the Finance Bill 2012, empowering itself to tax similar transactions after the Supreme Court ruled in Vodafone’s favour and said the tax department had no right to levy tax on the transaction.

remya.n@livemint.com

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First Published:2 May 2012, 10:57 PM IST
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