The Bombay High Court today issued a stay order on the showcause notice sent by the Income Tax (I-T) Department to British telecom major Vodafone. The I-T Department had asked the company to pay Rs 12,000 crore as tax on its acquisition of a majority stake in Hutchison Essar Ltd in 2007. The court fixed July 8 for the next hearing.

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Talking to reporters outside the court, Des Webb, group tax executive of Vodafone, said the order bars the tax office from further action for now. The I-T Department claims this tax is to be paid for the $11.2-billion purchase of Hutchison’s assets in Hutchison Essar at the time. The current demand notice follows another showcause notice of last month, claiming jurisdiction on the UK-headquartered company.

The department argues the company needs to pay capital gains tax as the assets that were bought are in India. Vodafone contends it is not liable to pay the tax as the deal was done outside India. It has filed a petition contesting the jurisdiction claimed by the tax authorities.

Justice D Y Chandrachud asked the I-T Department to prove its claim for jurisdiction and has given time till June 28 for a written response to the petition filed by Vodafone. The judge also said Vodafone’s petition was not comprehensive enough, and asked the company to make changes in its petition by June 15.

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