India’s income tax department is reportedly seeking a review of the Supreme Court verdict on the Vodafone tax case earlier this year. On 20 January, the Indian Supreme Court concluded that Vodafone was not liable for a US$2.4bn withholding tax bill…
India’s income tax department is reportedly seeking a review of the Supreme Court verdict on the Vodafone tax case earlier this year.
On 20 January, the Indian Supreme Court concluded that Vodafone was not liable for a US$2.4bn withholding tax bill linked to the purchase of a 67% stake in Hutchison Essar (now known as Vodafone India) in 2007.
The company said in a statement today that “the Supreme Court clearly and unambiguously ruled that there was no tax to pay on the Vodafone-Hutchison transaction.
“Vodafone notes the filing of the tax authority’s review petition, which will be evaluated by the same bench that ruled on the Vodafone-Hutchison case, and has no further comment to make at this stage”.
The Vodafone tax case attracted wide interest as the outcome was expected to have an impact on foreign investments in India.
Commenting on the verdict at the time, Neil Pamplin, tax director at Grant Thornton, had said that the ruling could encourage M&A activity in India and benefit the Indian economy overall. “[It] clarifies the situation and enables groups to consider investing into India again with the certainty that they should be able to structure an eventual sale without triggering a liability to Indian tax.”
At the same time, Ravishankar Raghavan, a principal in the tax group at Majmudar & Co, warned in late January that “the Indian government could potentially make certain proposals to dilute the effects of this decision in the forthcoming budget. But this would send a wrong signal to foreign investors.”
Today he added: “It’s an exceptional situation that the Indian government has decided to file a review petition because the Supreme Court has in very few instances reviewed its own rulings. So we will have to wait and see what happens.”
Investors in India are currently facing great uncertainty after the Supreme Court ordered the cancellation of 122 2G licences that were granted in 2008, against the backdrop of the 2G scam in the country.
