Vodafone Essar faces tax hurdle in tower case

Vodafone Essar faces tax hurdle in tower case

Mumbai: The tax man has opened a new front against Vodafone Plc, this time against Vodafone Essar, the local venture.

The income tax department has filed an objection in the Delhi high court, which is considering the scheme of demerger of Vodafone Essar’s tower assets into the three-way joint venture firm Indus Towers.

Vodafone Essar and Bharti Infratel each hold 42% in Indus Towers, while Aditya Birla Telecom holds the remaining 16%. Indus has nearly 96,000 mobile phone towers across India.

Legal sources, who declined to be named, have told CNBC-TV18 that the tax authorities have fears of potential tax forgone on account of the demerger of the towers owned by Vodafone Essar into Indus Towers.

In response, a Vodafone Essar spokesperson said the company has been informed of the tax department’s objection and will file a response (to the objection) shortly.

The tax department is learnt to have filed the objection only at the Delhi high court, even as the proposed scheme of demerger with respect to Indus Towers is being considered at other high courts across the country. This is because the demerger is being implemented through separate companies registered at different locations across the country.

The move comes at a time when the tax department is already engaged in litigation with Vodafone over a separate case over a disputed tax at source demand of nearly $2 billion (Rs9,360 crore).

Other sources contacted by CNBC-TV18 said Bharti Infratel and Aditya Birla Telecom have not received any objection from the tax man.

They added that the income tax department’s objection to the Vodafone Essar tower demerger may be unique as similar exercises by other mobile firms have not faced such a move.