The Vodafone Group has filed a petition in the Supreme Court to safeguard itself from more penalties from the income tax department on its Indian unit Vodafone Essar.
Prior to this, the income tax department on March 23, 2011, sought to penalise Vodafone International, the holding company of Vodafone Essar, for failure to present Cayman Island income tax returns and certain other documents. The department had asked for these documents between January and October 2009.
In January 2009, the Supreme Court rejected a writ petition by Vodafone challenging the original notice from the income tax department. The court referred the case back to the Bombay High Court while asking the department to decide if had jurisdiction to tax the transaction in which Hongkong-based Hutchision sold its Indian telecom unit to Vodafone in 2007.
The Bombay High Court started hearing the case from October 2009 and ruled against Vodafone in September 2010. The company has appealed this decision to the Supreme Court.
The tax department already has a pending case against the Vodafone Group seeking up to Rs 110 billion in penalty. The Indian tax department says Vodafone should have withhold capital gains tax from Hutchison in 2007, when the UK-based telecom operator bought 67 per cent voting rights in Vodafone Essar for $11 billion.
Vodafone bought the stake through Cayman Islands-based CPG, a unit of Hutchison Telecommunications International.
The company has submitted a deposit of Rs 25 billion and also provided a bank guarantee worth Rs 85 billion with a state-run bank.
Vodafone?s latest petition is aimed at blocking the tax department’s latest penalty. The company has stated that it was difficult to understand the rationale behind the tax authorities seeking to impose penalties on a matter which the tax authorities have themselves described as a ‘test case’.”
The case will be heard at the Supreme Court on April 7, 2011.
