I-T dept to issue Rs 12K cr tax notice to Vodafone

Last Updated : 27 September 2010, 15:16 IST
Last Updated : 27 September 2010, 15:16 IST

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The I-T department today said it will raise a tax demand of over Rs 12,000 crore to Vodafone over its USD 11-billion deal with Hutch following a Supreme Court directive to decide the amount to be paid by the UK-based company within four weeks.
The income tax department (I-T) also asserted that its action will not hurt the flow of foreign investments into the country.

"We will be raising tax demand on Vodafone within four weeks," Central Board of Direct Taxes (CBDT) Chairman S S N Moorthy told reporters here.
Meanwhile, Vodafone stuck to its position that it does not have a tax liability in the deal as it did not make any capital gains.

"We firmly believe that this transaction is not subject to tax in India. Furthermore, as Vodafone is the acquiring company, we have clearly not made any capital gain on the sale. We will continue to take whatever actions necessary to defend Vodafone's position as the matter proceeds," Vodafone said in a statement.
Moorthy said one month is given to a taxpayer to pay tax, after the issue of a tax notice.
He also said other cross-border deals are under the scanner of the department, but refused to name them.

Earlier in the day, the Supreme Court refused to stay the high court order, which has ruled that Indian income tax authorities have jurisdiction to tax Vodafone on its deal with Hutch.

The court issued notices to the tax authorities directing them to decide within four weeks the liabilities of Vodafone.

The court has scheduled the next hearing on the matter on October 25 and said on the basis of this order, liberty was given to the petitioner (Vodafone) to approach the court for an appropriate remedy.

When asked what will be the liabilities, Moorthy said it will be almost over Rs 12,000 crore, including interest on tax.
He said apprehensions that such an action will hurt foreign investments into the country stands belied.

"Apprehensions have been expressed in different quarters regarding the impact of such action of the Income Tax Department on foreign investment in India. The ruling, coupled with earlier rulings of the Bombay High Court, proved that Income Tax authorities in India have acted lawfully.

"This, together with the fact that India has received the highest ever foreign direct investment in the current fiscal, belies that apprehension," he said.
India has received over 19 billion dollar foreign investment, including 5.87 billion dollar FDI and 13.33 billion dollar FII, as per the latest figures.

Moorthy said that the income tax administration in India is transparent and friendly to the taxpayers and investors.

"There are multiple channels, both legal and administrative to address investor and taxpayer queries and grievances. The international investing community is free to explore these opportunities for an informed decision on investing in India," he said.
To a query whether the department will apportion Indian assets for computing tax liability and not overseas assets, Moorthy said he is not aware of apportionment in the order and will go by the law.

When asked whether Vodafone will be allowed to pay tax in tranches, he said the issue will come up at later stage.

Published 27 September 2010, 06:24 IST

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