THE British
Telecom company Vodafone has moved the Supreme Court to oppose the penalty
proceedings initiated against it by the Income Tax department last month
in the Rs. 11,000 crore tax dispute over the company’s acquisition
of Hutchison Telecom’s stake in the Indian joint venture with Essar in
2007.
According
to a company statement, Vodafone International Holdings BV, filed its petition
in the Supreme Court on Monday, against the penal action initiated under
section 271C by the Revenue.
The
dispute relates to the company’s failure to deduct withholding tax
at the time of purchase of the majority stake of Hutch for over USD 11 billion,
paid to a Hutchison-controlled company in Cayman Islands, against which the
Indian tax authorities raised a demand of over Rs. 11,000 crore on Vodafone
for not deducting tax at source. The case pending in the Apex Court is expected
to come up for hearing on July 19, 2011. In October last year the company had
also filed a writ petition in the Bombay High Court against the tax department
on the show cause notice relating to why the company should not be taxed as
an agent of Hutchison under section 163.
According to the
company, as the acquisition would not involve a tax liability, there was
no question of any penalty. Established tax laws were being ‘reinterpreted
in a completely new way’ and this was a ‘test case’ as India
had never before sought to tax such transactions of an overseas share transfer,
which would be contrary to international tax principles, designed to encourage
foreign investment.
|
