Tax cases always have their own peculiar way of drawing into their fold dimensions that are very vast and diverse, and of becoming almost larger than life.

The Vodafone tax case took this rule to a new height. Over the last couple of years, when not much has been going right for the Indian economy and the investment climate, the developments around this case have taken the centrestage over not just the tax principles involved, but also on several other crucial aspects. These include the direction of tax policy, desire of the administration to provide certainty and impetus to foreign capital investment, and the overall attractiveness of India as an investment destination.

When the Supreme Court finally pronounced its verdict on the case in favour of Vodafone, the winners are not Vodafone or Hutch, nor are the revenue department the losers. It?s the country that has come out on top, and at a time when a shining example was so desperately required.

The case originated when Hutchison sold its interests in a company in the Cayman Islands to Vodafone. However, since the Cayman Island entity was ultimately the holding company of the Indian operating business (then Hutch and, now, Vodafone), the Indian Revenue took a view that, in substance, an Indian business exchanged hands and, hence, the transaction was liable to tax in India.

Notices were issued to both the seller (for the primary tax liability) and the buyer (for failure to withhold tax). Vodafone, as the buyer, however, chose to adopt the route of a writ petition and approached the Bombay High Court, questioning the very jurisdiction of the Indian Revenue on the transaction.

Vodafone faced setback after setback when its pleas on jurisdiction were squashed by the Bombay HC and even the Supreme Court, and more so when the Bombay HC finally held that there was a tax liability in India, adopting a rather infamous A+B approach, ie, a view that in addition to the transfer of shares that was not liable to tax, there were transfers of several other rights and entitlements and these were liable to tax in India.

With the odds so heavily stacked against Vodafone, the SC, has, I would believe, taken a view based on simplifying the transaction and looking at the steps with the lens of first principles, rather than with the tarnished lens of conspiracy and convoluted tax jargon.

So, what did the SC say? It said that there was no extinguishment of rights in India by the sellers and, hence, there could be no question of the authorities here having the jurisdiction to tax the transaction.

It said that the provisions of the current law were not in the nature of look-through provisions and that the legislature would have to specifically enact them to tax such transactions. It also held that the provisions related to withholding tax cannot be extended to an offshore transaction. Concluding that the transaction was not liable to tax in India, the court ordered a refund of the tax of R2,500 crore that was collected as a deposit from Vodafone after the decision of the Bombay HC.

Getting into some technicality, the judgment is also crucial as it dwelled in great length on the concepts of tax avoidance and tax planning and also on whether the earlier ruling in the case of Azadi Bachao Andolan, which had in some sense upheld tax planning through the use of tax treaties, was a good law.

The ruling is clear that there is no conflict in the principles laid down in the ABA case with those in the famous McDowell?s case (related to tax planning vs avoidance). This finding gives a sense of d?j? vu and also relief to the many taxpayers fighting similar cases.

What struck me the most was the clarity and simplicity of the ruling and, unlike the A+B theory of the Bombay HC, the SC desisted from taking a theoretical view and rather applied a view, which more than being right (or wrong, as some may wish to hold), was a view that businesses can relate to as it brings to rest the uncertainty that was created by changing interpretations of a settled position of law. With the proposed DTC having several look-through and anti-abuse provisions, the longevity of this ruling may not be its claim to fame. Yet, this ruling will be remembered as a message to the tax administration that certainty must be provided at all costs and changing goalposts midway cannot be the rule of the day. But for this ruling, the 50-plus years of the Income-Tax Act, 1961, may have gone down in history as a law that allowed for any kind of interpretation and not just the correct one.

* The writer is partner, BMR Advisors. The views are personal