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While the I-T Department has contended in an affidavit that the transaction was liable for tax payment in India, Vodafone International Holdings contended that both the seller and buyer were foreign companies and that the deal was made outside India.
The Netherlands-based Vodafone International Holdings bought Hutchison Telecommunications India Ltd's (HTIL) stake in Hutchison-Essar in 2007 for over USD 11 billion.
Vodafone submitted that in the past, similar transactions were not deemed eligible for taxation in India and that the Indian revenue authority was stating through the media that the transaction in issue was a "test case".
The I-T affidavit said that HTIL had made substantial gains through its investments in India, which were liable to be taxed under the provisions of the Income Tax Act, 1961.
HTIL held a 66.98 per cent direct and indirect interest in Hutchison Essar Ltd, which had telecommunication licences to operate in a number of telecom circles in India under the brand name Hutch. Following the takeover, the joint venture was renamed as Vodafone Essar Ltd and operates under the brand name Vodafone.
The I-T Department said it was correct in holding that Vodafone International Holdings was an assessee in default, as it had failed to deduct tax at source on the USD 11.20 billion payment made to HTIL on May 8, 2007.
The revenue authorities had sent an advisory through a letter dated March 23, 2007, communicating to Hutchison Essar Ltd and through them to Vodafone International Holdings that the transaction was liable to be taxed in India, Assistant Director of Income Tax N K Govila said in the affidavit.
Vodafone International Holdings, challenging the I-T letter, contended in its petition that there had been no transfer of any capital asset located in India since the share capital acquired by it was of a foreign company registered in the Cayman Islands (that is, HTIL). MORE PTI SVS JJ RRN ARV ARV 08011216 NNNN
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