The show cause notice is issued to Vodafone International Holdings BVunder section 201(1) and 201(1A) of the Income Tax Act, 1961over non-payment of tax at source towards $11.2 billion it paid to buy Hutchisons operation in India in 2007. The date fixed for compliance of the notice is November 16, 2009, as per a statement by CBDT. FE had reported earlier this month that the CBDT is slated to send a show cause notice to Vodafone post Diwali.
While the CBDT will finalise the tax demand based on Vodafones response, its capital gains tax liability is estimated at $1.7 billion. There could also be a penalty and a 18% annual interest too. The company re-iterated its stand in an official release: Vodafone confirms it has received a Show Cause Notice from the tax department on Friday. Vodafone will be reviewing the document in detail and intends to respond to the tax department in due course.
Tax experts, though, say it could take up to four years before Vodafone actually has to fork out the money as it would once again go through the entire judicial process against the demand notice.