?

The Supreme Court is to hear the Vodafone Group?s challenge of the Bombay High Court order which made it liable to pay tax on a transaction with Hutchison to buy the equity stake in its Indian telecom companyHutchison Essar.

This case has been listed for hearing before a bench comprising of three judges headed by Chief Justice SH Kapadia. The court will decide whether the income tax department has the jurisdiction to tax Vodafone?s $11.2-billion purchase of 67 per cent controlling interest in Vodafone Essar.

Hutchison controlled its Indian subsidiary through a company called CGP, based in Cayman Island whose shares were sold to Vodafone. Subsequently, the income-tax department issued a show-cause notice on the company?s Netherlands-based subsidiary, seeking $1.7 billion as capital gains tax. It also sought to impose penalty for the company?s failure to deduct tax at source for the transaction. This was contested by Vodafone in the Bombay High Court, but its petition was dismissed.
Vodafone has then approached the Supreme Court, but the court refused to take up the matter. The court expressed its displeasure over Vodafone?s refusal to divulge the details of the agreement of such transaction and asked the assessing authority to decide on the issue of whether the revenue department had the jurisdiction to demand capital gain tax on the deal which was carried outside the country. Following a fresh hearing, the department issued an order on Vodafone, saying it had the jurisdiction to tax the deal. Vodafone once again approached the high court, which ruled in favour of the department.