Idea, Airtel linked to fate of Vodafone Gujarat dispute

The tax department has objected to Vodafone’s demerger of towers to Vodafone Essar Infrastructure contending it is the first step in an alleged tax avoidance arrangement prior to this entity’s amalgamation into Indus Towers, which also holds the towers of Bharti and Idea for common use. Tower sharing is encouraged by the government to keep costs low for making cellular telephony available in rural areas. Vodafone, Bharti and Idea own Indus in the ratio of 42:42:16.

The tax department’s claim that the scheme was meant to evade R3,500 crore of income tax and other state-level levies including R600-crore stamp duty, was first endorsed by a company law judge but was overturned by the Gujarat High Court in favour of Vodafone. The tax authority’s appeal is now being heard in the Supreme Court. Experts said that usually, any court order in a tax matter will apply only to the taxpayer concerned for the years specified, but any decision by the Supreme Court favouring the tax department, would have wider implications.

“The apex court’s ruling becomes the law of the land and it would, in principle, apply to any tax payer in identical facts and circumstances. However, for the income

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