Facing tax liability and penalty of around Rs 9,000 crore, Vodafone today accused the Indian tax authorities of interpreting the law in a new way and said there was no example of such taxes being imposed on overseas share transfer like the way it is done in its case.

“The company is surprised by the tax office’s actions, especially as Indian law precludes the tax authorities from imposing penalties in cases where the assessee has acted on reasonable legal advice in view of past tax precedent in India or the issue of imposition of tax is being decided for the first time by courts of law in India,” the telecom giant said in a statement.

Vodafone in 2007 had purchased 67% stake of Hutchison in Hutchison—Essar for over $11 billion. The Income Tax (I-T) Department had raised a demand of about $2 billion on Vodafone as it failed to deduct (withhold) tax at the time of stake purchase.

The I-T department had also issued notice to Vodafone in March saying penal action would be initiated against the British telecom major in the tax case.

Earlier during the day, the Supreme Court has directed UK-based telecom major Vodafone to appear before the Income Tax Department which had instructed the company to pay penalty in the 2$ billion tax case relating to the telecom major’s stake purchase in Hutchison-Essar.

Meanwhile, the court also made it clear that if the IT Department passes any order for penalty, it would not be enforced till Supreme Court’s further order as the main matter of tax dispute is still pending in the apex court.

Further, the company added that it is also difficult to understand the rationale behind the tax authorities seeking to impose penalties on a matter which the tax authorities have, themselves, described as a “test case”.

“All the advice received by Vodafone during and since the acquisition is that there is no tax or therefore penalty that arises and Vodafone will take all appropriate steps to defend itself and its investors against this latest unwarranted action from the tax authority,” it added.


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February 2024