Vittorio Colao, the CEO of UK-based Vodafone, was quoted saying that the company will continue to invest in India after receiving a favourable ruling in the tax case initiated by Indian authorities.
Colao added that the company would further invest…
Vittorio Colao, the CEO of UK-based Vodafone, was quoted saying that the company will continue to invest in India after receiving a favourable ruling in the tax case initiated by Indian authorities.
Colao added that the company would further invest in rural areas and in 3G network coverage, according to Dow Jones.
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.
It also ordered that Vodafone should be reimbursed US$500m in deposit.
This decision comes several months after Vodafone appealed a Bombay High Court decision.
In September 2010, the Bombay High Court concluded that authorities were allowed to levy a capital gains tax bill from Vodafone International, a Dutch subsidiary of the British mobile operator, on its US$11.2bn acquisition of Hutchison Essar.
The Indian Income Tax department argued, at the time, that the deal not only involved the transfer of shares but also a transfer of rights such as management control, brands and rights to conduct business in India – pointing towards an ‘Indian nexus’ and therefore allowing the country to claim tax.
Vodafone appealed this decision in the Indian Supreme Court, arguing that as a buyer rather than a seller, Vodafone could not make a capital gain. It also said that the deal took place between two non-Indian companies in the Cayman Islands.
The outcome of that case, which had attracted wide interest, “now 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,” Neil Pamplin, tax director at Grant Thornton, commented.
“This should encourage M&A activity in India and in the longer term benefit the Indian economy by much greater sums,” he added.
Vodafone India is also expecting to step up efforts to list itself on the country’s stock exchanges.
In mid-December, Marten Pieters, CEO of Vodafone India, was quoted telling its staff that the company was gearing up for an IPO after receiving approval from Vodafone. But he reportedly added the Indian market needed to be ready first.
