Aug 30, 2017 income tax department seeks rs 32,320 crore from hutchison over vodafone deal this is the first time a tax demand on the hong kong firm is being raised. In india there was the earlier case over the purchase of the hutchisonessar business. The vodafone tax case throws an interesting question on the taxability of a non resident company acquiring shares of a resident company through an indirect route. Vodafone idea is a panindia integrated gsm operator offering 2g, 3g and 4g volte mobile services under two brands named vodafone and idea.
Vodafone questions imposition of income tax of over usd 2 billion tax on its deal to buy hutchisons assets in india in 2007, saying the company was the buyer and not a seller. The indian income tax authorities claimed that vodafone was to pay capital gains tax on capital gains accrued due to the consequent control of hutichisonessar limited. While the decision is ostensibly a victory for taxpayers who do business in india, the case may be a harbinger of tax concerns in india and other countries. Through several agreements, the primary of which being a share. Kong based hutchison whampoas indian mobile unit hutchessar for. Dec 08, 2008 an earlier post mentioned that the decision of the bombay high court in the vodafone case had gone against the petitioners, i. It argues that the company should have deducted tax at source while making payment to htil. Vodafones main stand against the contention of the income tax authorities of vodafone being liable to pay the taxes since the intention of vodafone was to purchase the 67% shareholding under hutchinson essar, which was a company based out of india and also that the gains were liable to be taxed since as the transfer of controlling stake. Vodafone tax case a case study for investments in india. Case on merger acquisition of hutch and vodafone marketing. However, the text of the judgment which was not available as on the date of that post has become available since, and throws up some interesting issues for discussion the issues before the court were a the. So far, the indian government had been pursuing the tax from vodafone. Vodafone hutchison australia vha operates the vodafone and 3 brand mobile telecommunications products.
Vodafone group plc is a british multinational operator headquartered in newbury, england. The mumbai bench of the incometax appellate tribunal tribunal pronounced its ruling in the case of vodafone india services private limited taxpayer vispl. All you need to know about vodafone tax case zee business. In a local stock exchange filing, ck hutchison holdings has said its unit, hutchison. Idea and reliance jio, in four out of five metrics, according to a study. This muchneeded elucidation would assist taxpayers in conducting transactions within the framework of the law. Counsel appearing in support of the petition, submits as under.
Vodafone hutchison australia vha is an australian telecommunications company providing mobile and fixed broadband services. The curious case of extraterritorial taxation in india lexology. Vodafone hutchison australia pty limited vha is an australian telecommunications company providing mobile voice, text and data services to individual customers and businesses and in october 2016, vha announced it would enter the fixed broadband market in late 2017. Digital content home global insight inhouse perspective news analysis guides and free materials. Acquisition an acquisition is the purchase of one company by another in which no new company is formed. However, the text of the judgment which was not available as on the date of that post has become available since, and throws up some interesting issues for discussion.
Vodafone group won another big tax battle in india as a local court ruled thursday that it didnt owe potentially hundreds of millions of dollars in back taxes. Vodafone tax case the tax dispute between the indian tax authorities. This is a landmark case, as it is for the first time that the tax departments have sought to tax a company through a mechanism of tracing the source of acquisition. An earlier post mentioned that the decision of the bombay high court in the vodafone case had gone against the petitioners, i. Merger a merger involves the mutual decision of two companies to combine and become one entity.
One of the most controversial economic issues in the last five years was the tax dispute between vodafone and the tax department. Vodafone case and effect of amendments by finance act, 2012. The tribunal held that recasting of framework agreement fwa in 20071, tantamounts to assignment of the option. In vodafones case, clearly a series of tax havens and spvs. The vodafone hutchison case and its implications vccircle.
Last year british telecom giant vodafone paid hong kong based hutchison international over usd 11 billion to buy hutchisons 67% stake in indian telecom company hutchison essar. Vha was formed in june 2009 following a merger between vodafone australia and hutchison 3g australia. Vhas 4g mobile network covers more than 22 million australians, and the company has commenced the rollout of its 5g mobile network. High court judgment dated 8th september 2010 in the tax liability matter of vodafone international holdings b.
India to change tax law after vodafone case financial times. Vodafone was initially slapped with rs 7,990 crore tax demand for not withholding tax from payments it made to hutchison. The quantum of tax demand by the indian revenue authorities in this particular case was around rs. Last year british telecom giant vodafone paid hong kong based hutchison international over usd 11 billion to buy hutchison s 67% stake in indian telecom company hutchison essar. Gujarat government in early 2000s announced that any one who sets up industries at kutch yes, which suffered earthquake will not need to pay taxes.
Cayman island mauritius was a 100 % subsidiary of hutchison hongkong. In one of the most high profile cross border tax litigation involving taxability of a. The vodafone case, involving the indirect sale of shares of an indian company by upper tier nonindian corporations, focused attention on the extraterritorial reach of indias taxing power. May 10, 2015 fact of case during the ay 200910, vodafone india issue equity share to vodafone holding at premium and the same is mentioned in 3ceb in tax audit report. All you wanted to know about the vodafone tax case. All is not lost by aditi mukundan and bijal ajinkya c ould a simple transfer of shares of a nonindian company by a nonresident purchaser and seller result in a great deal of chaos in the already complex world of taxation. The vodafone case and its effects on indian taxation article. Income tax one among st the main issues surrounding the impasse is the payment of ejected liability carrying a whopping sum of rs. However, taxation of such holding structures very often gives rise to issues such as double taxation, tax deferrals and tax avoidance. Vodafone has become snarled up in the indian corporate tax system. However, the companys subsidiary exchanged cash for shares with a similar holding company for hutchison essar, in far off cayman islands. Vodafone india is the indian subsidiary of ukbased vodafone group plc and is a provider of.
The tax season just ended in india with the end of the year tax assessments on september 30 and many companies were busy with their filings. Surprisingly the indian revenue authorities have taken a rather aggressive stance and have. What exactly was the problem in the vodafonehutchison tax. Azadi bachao andolan,4 which recognized the mauritius route for investment into india, even if it was a case of treaty shopping.
User manuals, vodafone cell phone operating guides and service manuals. Hutchison hongkong is a non resident having no tax implications in india. Dec 16, 2016 in a major relief to british telecom major vodafone in the transfer pricing case, the bombay high court on thursday ruled in its favour, setting aside a tax demand of rs. The joint director of income tax international taxation, in the meanwhile, issued a notice dated 15. Supreme court held that assessing officer in india had no jurisdiction to tax the transaction which took place outside india and what was transferred was the shares of a foreign company namely cgp of caymans island and not the. Vodafone casesummarised by rohit kapoor vodafone case summarised by rohit kapoor facts of the case. In the present case it is apparent that hutchison had a. As of march 2018, vodafone india has a market share of 21% and with its merger with idea, the collective vodafone idea network has approximately 375 million subscribers and is the second largest. Chronology of events the supreme court today directed the it department to return rs. Court had ruled that the vodafonehutchison deal could not be taxed in india.
Jan 08, 2018 case law vodafone case vs income tax department vodafone india, formerly vodafone essar and hutchison essar, is the second largest mobile network in india. Case law vodafone case vs income tax department vodafone india, formerly vodafone essar and hutchison essar, is the second largest mobile network in india. The tax authorities filed a case against vodafone in the bombay high court. Firstly, by making its own infrastructure, opening braches across india, recruiting its workers and what not. All you wanted to know about the vodafone tax case the. Vodafone india is the indian subsidiary of ukbased vodafone group plc and is a provider of telecommunications services in india with its operational head office in mumbai. What exactly was the problem in the vodafonehutchison tax case. Vodafones tax case leaves a sour taste richard murphy. What is the controversy related to retrospective taxation. Vodafone case highlights potential investor minefield iba.
It is known fact that the most of the corporate entities are using the method of window. Vodafone is the worlds largest mobile telecommunication network company, based on revenue, and has a market value of about. Appeal at bombay high court vodafone india challenge the decision of ao at high court that chapter x of income tax act, 1961 is not applicable in issue of equity share to its holding company. A goal of transfer pricing may be to maximize after tax revenue besides reduction in the total tax paid. Vodafone cell phone user manuals download manualslib. Vodafone idea limited is an indian telecom operator with its headquarters based in mumbai, maharashtra and gandhinagar, gujarat. Vodafone company in england wanted to enter in indian market in 2007.
Recent tax developments in india highlight the need for focused legal. Vodafone idea also provides services including mobile payments, iot, enterprise offerings. Vodafone hutchison australia pty limited board of taxation. Oct 22, 2010 t heres a flurry of tweets and a petition currently making rounds on the internet asking vodafone to pay its taxes. Mar 12, 2018 the tax department has asked hong kongbased hutchison holdings to pay up over. Income tax instructions, news, notificationscirculars. Vodafone wins transfer pricing tax dispute case the hindu.
The case originated after the revenues tax department notice to vodafone that the company has to pay a capital gains tax of nearly rs 1 crores from its purchase of hutchison essar telecom company from hutch. The tax department has asked hong kongbased hutchison holdings to pay up over. What is the controversy related to retrospective taxation in. Here, i present the continue reading vodafone case and effect of amendments by. Case on merger acquisition of hutch and vodafone marketing essay. The case dates back to financial year 20078 involving the sale of vodafone india services private ltd. In april 2014, india based piramal group sold its 11% stake in vodafone india to prime metals, an indirect subsidiary of vodafone group. Vodafones alleged deal with hmrc reinforces the business friendly image of our tax authority. Apr 29, 2020 vodafone tax case vodafone idea will bounce back despite agr stress, says bharti infratel in an earnings call, akhil gupta, chairman of bharti infratel, also said the company believes in returning surplus to shareholders be it by way of dividend or buyback, and while it has used the dividend route, the firm is open to considering buyback, in.
May 09, 2016 pls bear with the example for 2 minutes. The outstanding after including interest and penalty runs over rs 20,000. An issue squarely won by vodafone in a proactive tax war with the authorities at the honble s. Vha provides mobile services to more than 6 million customers. The tax will have to be paid with a retrospective effect from june 2002. How did vodafone avoid capital gains tax through clever. One nonresident company, hong kongbased hutchison telecommunications international limitedhtil transferred to a second nonresident company, ukbased vodafone group plc an indirect controlling interest in the indian company hutchison essar limitedhel. At the time, indian tax authorities did not have a say in the companys doings as the deal was done entirely offshore. Under indian law the sale of a company in india can lead to a possible capital gains tax bill which is quite.
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