SC adjourns hearing on Vodafone tax case to November 15

Telecom company sought time to go through notice of IT department

PTI | October 26, 2010



The Supreme Court today adjourned a hearing on the tax case against Vodafone to November 15 after the telecom company sought time to go through the Rs 11,218 crore tax notice sent by the Income Tax Department.

During the proceedings, the counsels appearing for Vodafone informed the apex court that they got a copy of the I-T Department's order late on Friday.

"We got the orders of the I-T Department late evening Friday," senior advocate Harish Salve, appearing for the British telecom giant, said.

He sought more time to file reply on the recent tax demand raised by the I-T Department on the overseas transaction following instructions from the apex court.

This was accepted by a bench comprising Chief Justice S H Kapadia and Justices K S Radhakrishnan and Swatantra Kumar.

"Place this petition on November 15, 2010. The registry is directed to accept the additional documents. Place all the interlocutory applications and additional documents on the next date of hearing," the court said.

Meanwhile, the bench also said that recent case filed by Vodafone in the Bombay High Court against the I-T Department for holding them as Hutchison Telecommunication International Ltd's agent for the transaction, would continue.

On Friday, the I-T department had fixed a tax liability of Rs 11,217.95 crore on Vodafone International Holdings BV, treating it as an assessee in default for its failure to deduct tax at source, as required before making a payment of USD 11,076 million (about Rs 55,000 crore) to Hutchison Telecommunication International Ltd.

Following the stake transfer in 2007, Hutchison Essar was renamed Vodafone Essar.

Earlier, the apex court had declined to stay the Bombay High Court order and said such the relief could be granted only if the company was ready to make part-payment of the tax demand.

"If you want a stay on the High Court judgement... you have to pay part of the amount. The choice is yours," the bench said while asking the counsel not to press for the stay.

The apex court had said it will consider an early hearing on the matter and directed the tax authorities to decide the liabilities of Vodafone within four weeks.

"Pending the hearing and further orders, we direct the TDS officer to decide within four weeks from today on the tax liability," the apex court had said, asking Vodafone to take further legal recourse after its liability was fixed.

Vodafone has since claimed that no tax is payable by the company and the Indian tax authorities have no right to seek tax, as the transaction was executed outside the country.

Earlier, dismissing the plea of Vodafone, the High Court had held that the I-T department had the jurisdiction to tax the transaction. .

Hutchison's telecom business in India comprised a substantial chunk of its overall business and the deal enabled Vodafone to enter the Indian market in a big way.

The High Court, however, gave Vodafone the liberty to argue before the tax department that no penalty should be imposed, as they genuinely believed they had no liability to deduct tax at source while making the payment to Hutchison.

The department held Vodafone liable for not deducting tax at source on capital gains accruing to Hutchison and claimed around Rs 12,000 crore in tax and as a penalty on the 2007 deal.

 

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