British telecom czar Vodafone Group is leaving no stone unturned in its effort to avoid the Rs 12,000 crore unforeseen tax burden. Earlier, Bombay High Court had ruled against Vodafone in its appeal against the Indian tax authorities, saying that the Vodafone-Hutchison deal is taxable. Vodafone had bought 67% controlling stake in Hutchison Essar Ltd (HEL) by buying out the shares of Hong Kong-based Hutchison Telecom in 2007.
The company maintains that it is not liable to pay tax on the transaction. A statement issued by Vodafone, disclosing the appeal filed in SC, points to the firm stand taken by the company in this regard. It said, “The appeal challenges the recent High Court judgment on the issue of jurisdiction. Vodafone remains convinced that there is no tax to pay on the Hutchison transaction and we will continue to defend this position vigorously.”
Vodafone argues that since the transaction took place outside the country and the two parties involved are not based in India, the transaction doesn’t invite tax liabilities. However, the Indian tax authorities had raised the issue in 2007, issuing show cause notice, saying that the company should have deducted the tax amount before the payout to Hutchison. In the petition filed by Vodafone against this notice in Bombay High Court, the Court ruled that the Income Tax department has jurisdiction in levying tax on the transaction as it involved indirect transfer of Indian assets, which accrue revenue in India. The Court has allowed Vodafone to argue its case before the IT department on the penalty imposed, as the company was genuinely not aware of the tax liabilities at the time of the deal.
Though Vodafone is the first company to bear the brunt of the scrutiny of tax authorities, taxation experts say that hundreds of similar cross-border transactions have taken place in the past seven years. SSN Moorthy, Chairman, Central Board of Direct Taxes had briefed media persons on Monday that officials are already investigating such deals.



