An Indian court ruled that authorities are allowed to seek a Rs 120bn (US$2.6bn) tax bill from Vodafone International, a Dutch subsidiary of the British telecom group, on its US$11.2bn acquisition of Indian telco company Hutchinson Essar in 2007.
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An Indian court ruled that authorities are allowed to seek a Rs 120bn (US$2.6bn) tax bill from Vodafone International, a Dutch subsidiary of the British telecom group, on its US$11.2bn acquisition of Indian telco company Hutchinson Essar in 2007.
A Vodafone executive told journalists that the company would think seriously about appealing the decision to India’s Supreme Court.
The company has been trying to fight the tax bill for several months now, arguing its subsidiaries in Mauritius and the Cayman Islands, where the stake changed hands, were fully functional companies. Recently, Vodafone lawyer Harish Salve was quoted as saying that because India has a double taxation treaty with Mauritius, investments made in India from the country are not subject to tax.
But the Indian Income Tax department argued that the deal not only involved transfer of shares but also a transfer of rights such as management control, rights on brands and rights to conduct business in India. As a result, the tax department said such transfer of rights pointed towards an “Indian nexus”, allowing the country to claim tax on the transaction.
Vodafone International bought 67% of Hutchinson Essar, now known as Vodafone Essar, from Hong-Kong-based conglomerate Hutchison Whampoa in 2007.
