Idea, Airtel linked to fate of Vodafone Gujarat dispute

When contacted, a spokesperson for Bharti Airtel declined to comment on the issue that is sub-judice. Idea Cellular could not immediately respond to a query emailed on Thursday. Idea Cellular got Gujarat High court’s approval for demerging towers to Idea Cellular Towers Infrastructure in August 2009. Ernst & Young tax partner Pranav Satya said the apex court decision could impact other companies too depending on the way the judgment is passed.

Any tax demand on Idea and Airtel by the department would depend on its assessment of the market valuation of the assets transferred and the capital gains on that. Since employees and other liabilities such as interest cost have not been transferred to the respective tower companies, the department may also deny any deduction of such expenses claimed by the parent company.

Interestingly, the tax authorities responded to a customary newspaper announcement of the demerger scheme of only Vodafone while Bharti Airtel and Idea Cellular got their schemes sanctioned without any objection from the tax officers. Vodafone had cited various judgments that sanctioned such demerger schemes, while leaving tax issues open, suggesting that a tax claim is no ground for barring a demerger of infrastructure assets aimed at better efficiency and lower operational costs.

The department held that the scheme led to avoidance of stamp duty of Rs 600 crore, assuming the market value of the assets demerged at Rs 15,000

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