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.

The government has revamped the Wholesale Price Index (WPI) system from August. An announcement to this effect was made by Anand Sharma, Union Minister of Commerce & Industry at a press conference in New Delhi today. In the new series, the inflation stood at 8.5% for August. The overall inflation for August was 9.5% as per the old series (base year 1993-94).

Mr. Sharma informed that the new WPI series has been prepared by shifting the base year from 1993-94 to 2004-05. Moreover, the new series would include commodities for the calculation of WPI. While 400 odd products are added to the goods basket, about 200 outdated items are dropped from it. Added products include gold, silver, refrigerators, computers, television, VCD, dish antenna, washing machine, microwave oven, mineral water, readymade food and crude petroleum. The inclusion of new items that are widely used by middle-class would help in tracking the changing consumption pattern.

“It (the new series) will help in informing both the government and people how the prices are moving. This will give a robust picture and reflect actual price movement,” Mr. Sharma said.

Finance Minister Pranab Mukherjee remained optimistic when he said, “Inflationary pressure is still there because food prices have gone up because of the erratic monsoon, but I do hope annualized inflation would be much lower in the new series.”

“The change in base would improve the accuracy and make the index less prone to fluctuations,” said TCA Anant, chief statistician of India. He added, “The commodity basket will be analyzed every quarter, even though the groups will remain fixed.”

The new WPI series is based on the recommendations of a working group headed by Abhijit Sen, member, Planning Commission.

Union Finance Minister Pranab Mukherjee conceded that the escalating food price inflation is indeed worrisome and suggested solutions such as appropriate monetary measures by RBI and inducing efficiency in the public distribution system (PDS) by state governments. The Finance Minister was speaking at the 179^th Annual General Meeting (AGM) of the Calcutta Chamber of Commerce in Kolkata on Saturday.

Mr. Mukherjee said that when there is an efficient PDS in place, it will provide food grains at subsidized rates to more than 40-50 crore people in the country, with the rest of the population having means to procure it from market. He stressed the importance of food economy in India. “Development of PDS infrastructure is the responsibility of the state government. It is not a question of passing the blame but a constitutional arrangement,” he added.

The Finance Minster acknowledged the close relationship between inflation and economic growth. However, he said that inflationary problems will not prompt him to slowdown the healthy growth of the economy. “I am concerned that the prices are increasing. But I cannot ignore economic factors and change the gear of growth in reverse direction.”

Mr. Mukherjee also defended the government move to procure food grains in huge quantities. He said that as agriculture in the country is still dependent on rains, it would be foolhardy on government’s part to choose not to procure and rely on good fortune. “If we don’t procure so much, how are we going to feed our 120 crore population although there is a little bit of risk of damage,” he asked.

FM’s statement that the RBI will take ‘whatever’ steps to curb inflationary tendencies indicates the government’s stand ahead of RBI’s mid-quarter monetary policy review scheduled next week. Already speculations were rife that interest rates will be hiked following the tremendous jump in the industrial growth rate.

Oman Oil Company has agreed to invest in the Indian fertilizer sector to help in the revival of a few closed plants of Fertilizer Corporation of India (FCI) and Hindustan Fertilizer Corporation Ltd. (HFCL) and in the expansion of Rashtriya Chemicals and Fertilizers (RCF). An agreement to this effect was reached at the 6th Indo-Oman Joint Commission Meeting held in Muscat on Sunday. The Indian delegation was lead by Minister of Commerce & Industry Anand Sharma.

Both countries are planning to set up a senior-level working group with representatives of RCF, Krishak Bharati Cooperative Ltd (KRIBHCO), the Indian government and the Oman Oil Company to kick off due diligence process at the earliest.

The Joint Commission also explored ways to expand the existing capacity of the urea project of the Oman India Fertilizer Company (OMIFCO) from the current 16.5 lakh tonnes per year to 25 lakh tonnes.

Other developments in the bilateral trade talks include a feasibility study for setting up a lube blending plant in Oman by BPCL and Oman Oil Marketing Company for marketing in the neighboring countries.

Oman has evinced keen interest in setting up super-specialty hospitals and diagnostic facilities in India as joint ventures. An Omani delegation would visit India at the earliest to take this forward. Oman is also interested in investing in agro processing, especially in SEZs.

Mr. Sharma emphasized that Indian government is giving top priority to its bilateral cooperation with Oman in petroleum, gas and fertilizer sectors. The bilateral trade between the two countries reached $4.5 billion last year, with the total bilateral investment touching $7.5 billion. Mr. Sharma said that Oman, with its strategic location and existing FTAs with several countries including the USA, offers huge opportunities for Indian companies.

The minister also stressed on immediately operationalizing India-Oman Joint Investment Fund and the need to augment the fund capital. The fund started in November 2008 with a capital of $100 million may be increased to $1.5 billion.