British mobile operator Vodafone is liable to pay tax on the US$11.2bn acquisition of Indian telco company Hutchinson Essar in 2007.
The Indian Income Tax department told the division bench of the Bombay High Court that it has the jurisdiction to levy…
British mobile operator Vodafone is liable to pay tax on the US$11.2bn acquisition of Indian telco company Hutchinson Essar in 2007.
The Indian Income Tax department told the division bench of the Bombay High Court that it has the jurisdiction to levy tax on the deal, according to an Economic Times of India report.
A few weeks ago, the UK mobile operator fought the reported US$2bn tax bill, arguing its subsidiaries in Mauritius and the Cayman Islands, where the stake changed hands, were fully functional companies. In the report, 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 said 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, lawyer Mohan Parasaran representing the tax department said such transfer of rights pointed towards an “Indian nexus”, allowing the country to claim tax on the transaction, according to the Economic Times.
Vodafone bought 67% of Hutchinson Essar, now known as Vodafone Essar, from Hong-Kong-based conglomerate Hutchison Whampoa in 2007.
The company was not available for comment before going to press.
