Citing the Supreme Court order in the Vodafone case, the Bombay High Court today dismissed the SABMiller writ petition against a showcause notice issued by the Income Tax Department. CNBC-TV18’s Ashwin Mohan reports on how this matter is similar to the Vodafone case?

This case is similar to the Vodafone tax tussle. The Income Tax Department order on Vodafone is still pending.

In both these cases, shares of an overseas entity were sold from one non-resident company to another non-resident company and that overseas entity had a controlling stake in the Indian subsidiary. So that is how the Vodafone case and the SABMiller case are same.

The Bombay High Court has said today that principally the SABMiller matter and the showcause notice which has sent to them by the Income Tax department bears a lot of resemblance to the Vodafone tax tussle. But one point to be kept in mind is that the crucial IT department order on Vodafone is still pending.

Thus, citing the SC judgement, the Bombay HC today has dismissed the SABMiller writ petition which was filed against the showcause notice which was sent to them by the IT department. The reason cited was that SABMiller had filed the writ petition in the Bombay HC before responding to the IT department’s showcause notice. They were supposed to respond, they didn’t respond but they went ahead and filed the writ petition that is why it was dismissed.

Also, directions have been given by the Bombay HC to the IT department to first decide on the preliminary aspects of jurisdiction. Can the IT department apply the concept of withholding tax on SABMiller and do they have the jurisdiction for it? Hence, the IT department needs to revert on that stance of jurisdiction. That is an important takeaway from today’s hearing.

Since SABMiller missed the date to respond to the showcause notice, the Bombay High Court has given them four weeks to respond to the IT department’s showcause notice. Of course we have an IT department order which will be expected in some time  if that IT department on the jurisdiction of SABMiller matter goes against SABMiller then SABMiller does have the option to again appeal in court.

To put things in perspective, this showcause notice was issued to SABMiller by the IT department on March 16, 2009 and the entire showcause notice is related to the non-withholding of tax in the Foster’s India and SABMiller acquisition way back in 2006 which amounted to an amount of 110 million but one thing is for sure, today’s order very clearly shows that the Vodafone order is crucial to all cross-border transaction issues.

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