Brief : In this judgement, after hearing the matter, vide its order dated 8 September, 2010 running into 196 pages, the HC has dismissed the writ petition filed by VIH, holding that the proceedings initiated by the Revenue Authorities (“RA”) under section 201 of the Act cannot be held to lack jurisdiction.
The HC further held that since it has upheld the jurisdiction of the RA, it was not inclined to stay the operation of the proceedings under section 201 of the Act. However, the HC has directed the RA that no final orders can be passed for a period of eight weeks.
Citation : Writ Petition No. 1325 of 2010 decided by the Bombay High Court In The Case Of Vodafone
Court : Bombay High Court
Facts in brief
- · Vodafone International Holdings B.V. (“Vodafone”) was issued a notice by the Indian tax authorities in the context of non-compliance of Indian withholding tax obligations (vis-à-vis the acquisition of shares of a non-resident Hutchison Group entity (“HG”) outside India).
- · The primary allegation of the Indian tax authorities was that though the shares transferred belonged to a non-resident entity and the share transfer had taken place outside India (from one non-resident to another), what effectively exchanged hands pursuant to the transaction was the “controlling interest” in Hutchison Essar Limited (“HEL”), which was held indirectly by HG. HEL was the flagship company which held the telecom business of the Hutchison Group in India.
- · Vodafone filed a writ petition before the Bombay High Court against the said notice. The Bombay High Court rejected the writ petition and made a prima facie observation that the transaction under consideration may be liable to tax in India since the underlying intent of the transaction was to transfer “controlling interest” in HEL from HG to Vodafone.
- · Aggrieved by the above, Vodafone filed a special leave petition before the Supreme Court. The Supreme Court dismissed the special leave petition and directed the Indian tax authorities to examine the limited question as to whether they have sufficient territorial jurisdiction to levy tax on the transaction under consideration.
- · Further, the Supreme Court also provided relief to Vodafone by directing that in case the order passed by the Indian tax authorities is against Vodafone, it could directly approach the Bombay High Court for quick adjudication (i.e. it would not be required to go through the elaborate procedure of first approaching the appellate commissioner and income tax appellate tribunal before appealing to the Bombay High Court).
- · In response to the Supreme Court’s direction and post completion of a detailed scrutiny, the Indian tax authorities passed a voluminous order adjudicating that they had territorial jurisdiction to tax the transaction under consideration. Further, they also held that the transaction was taxable in India and Vodafone was an “assessee in default” for not having complied with its withholding tax obligations.
- · Based on the relief granted by the Supreme Court, Vodafone directly approached the Bombay High Court against the said order of the Indian tax authorities.
- · A brief summary of the key contentions put forth by Vodafone and the Indian tax authorities and the resultant verdict of the Bombay High Court is as follows.
Key contentions by Vodafone
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