Vodafone International BV on Friday filed a writ petition in the Bombay High Court to defend itself against a different course of action now taken by the Income-Tax (I-T) Department in the landmark Vodafone tax case.
The I-T Department recently sent a notice that sought to treat Vodafone International (purchaser) as a “representative assessee” (agent) of Hutchison Whampoa (seller) and therefore bring to tax assessment the entire income (gains/profit) in the $11-billion Vodafone-Hutch deal of 2007.
The implication of this move is that Vodafone may now be faced with a much higher tax bill from Indian tax authorities than earlier envisaged for its alleged failure to deduct tax at source. The I-T Department was hitherto looking to demand Rs 12,000 crore-plus from Vodafone towards tax and interest relating to the withholding tax obligations on the deal.
Vodafone International has, however, in the writ petition filed today contested the Tax Department's latest step to treat it as an agent of the seller, stating that such an action was misguided and premature when the key issue of jurisdiction was currently under appeal before the Supreme Court.
The main issue on jurisdiction was whether the Indian tax authorities could tax the transfer of a foreign company's shares between two non-residents if some of the underlying assets were located in India.
Meanwhile, the Income-Tax Department sees merit in adopting a new course of action of seeking to treat Vodafone International as a representative assessee.
“The earlier action was for failure to conform to TDS obligations. That is different as it related to deductor's liability. We are now further proceeding to do income assessment of the deal and treating Vodafone as a representative assessee of the seller for this purpose,” official sources said.
The Bombay High Court is slated to hear the matter on the writ petition on October 27. The Supreme Court hearing on the jurisdiction matter is scheduled for October 25. The four-week period given by the Supreme Court to the Tax Department to determine and quantify the tax liability of Vodafone ends on October 23.
Meanwhile, Vodafone said on Friday that the Indian tax office's actions are “an unusual development, not least because they ignore the imminent hearing of the Supreme Court on the jurisdiction issue”.
Vodafone continues to believe that it has no tax liability whatsoever on this transaction and we look forward to this matter being thoroughly reviewed by The Supreme Court, a Vodafone Group Plc spokesperson said.
Source Link : http://www.thehindubusinessline.com/2010/10/16/stories/2010101651310300.htm
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