Vodafone wins tax case in India; IT department to return Rs 2,500 cr within two months

Posted By: Religare
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Vodafone wins tax case in India
Vodafone has won a major legal battle in India. The Supreme Court today set aside a judgment of the Bombay High Court that had asked Vodafone to pay income tax of Rs 11,000 crore on its acquisition of Hutchison's Indian mobile business.

Vodafone had acquired Hutchison Whampoa's Indian wireless business in 2007 for USD 2.2 billion.

In its order today, Chief Justice of India, S.H. Kapadia said that the government of India has no jurisdiction over Vodafone's purchase of mobile assets in India as the deal between Hutchison and Vodafone took place in Cayman Islands and not in India.

The Income tax department of India was contesting that the deal is liable to be taxed in India because the underlying assets are in India. The Apex court today in its decision rejected this contention of the tax department and said that capital gains tax is not applicable on the acquisition.

The Apex court has also ordered the income tax department to return back the Rs 2,500 crore that Vodafone had deposited - after the Bombay High Court order - within 2 months with interests.

Senior lawyer Harish Salve who was standing on behalf of Vodafone sounded jubilant after the order. He said, “I am very happy with the verdict; very few countries can boast of such a judiciary."

The judgment today is a boost today for other multinational companies that have made acquisitions in India in the recent past. These include GE, SAB Miller, Cadbury, AT& T etc. All these companies are fighting similar battles with the Indian income tax department in various courts of the country.

The decision is expected to give a boost to Foreign Direct Investment (FDI) in India. Shares of Vodafone, after the verdict, increased by 1.4 per cent in London.

Dion Global Solutions Ltd

Read more about: vodafone, tax, interest rates
Story first published: Friday, January 20, 2012, 23:35 [IST]
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