Barely a month after the Supreme Court passed its verdict in the Vodafone tax issue, the Centre has requested the Court for a review of the judgment.
A statement issued by Vodafone in response said that the Court had clearly and unambiguously ruled that there was no tax to pay on the Vodafone-Hutchison transaction.
In its verdict, the Supreme Court had stated that operator?s acquisition of majority stake in Hutchison-Essar Limited (HEL) was not subject to any capital gains tax and the Indian tax authorities had no territorial jurisdiction over such offshore transactions. The apex court had set aside the Bombay High Court ruling, where it was being asked to pay an income tax of Rs 110 billion for purchasing Hutchison Whampoa’s Indian mobile business in 2007.
Further, the Court had directed the I-T Department to return Rs 25 billion deposited by Vodafone as security with the department.
The case dates back to May 2007, when Vodafone acquired 67 per cent stake in the Hutchison-Essar Limited (HEL) in a $11.2 billion deal. The stake was purchased from Hong Kong-based Hutchison Group through companies based in Netherlands and Cayman Island.
The I-T Department had issued a show cause notice to Vodafone asking it to pay capital gains tax on the deal. It stated that since the operator made capital gains in India through the deal, Vodafone was liable to pay the tax for it.
Vodafone, however, challenged this before the Bombay High Court saying it was share transfer carried outside India. The appeal was rejected by the High Court in December 2008 after which Vodafone had approached the apex court.
SC also dismissed Vodafone’s appeal in January 2009 and directed I-T Department to decide whether it had the authority to tax the transaction. The Supreme Court, however, stated that the operator would have the liberty to challenge the department’s decision in the court.
The I-T department passed an order in May 2010 and held that it had competent jurisdiction to treat Vodafone as an ‘assessee in default’. Again, this decision was challenged by Vodafone before the Bombay High Court.
The High Court, in its judgement in September 2010, dismissed Vodafone’s petition on the grounds that the essence of the transaction lies in the change in the controlling interest in HEL, which had a source of income in India.
Vodafone then approached the apex court in this regard and had been awaiting its ruling since then.
