Mumbai HC admits Vodafone appeal

Written by Economy Bureau | New Delhi, Jan 28 | Updated: Jan 29 2008, 04:10am hrs
The Mumbai High Court admitted on Monday the writ petition by Vodafone International Holdings BV (VIHBV) challenging the income tax departments notice seeking payment of capital gains tax by the company. A final hearing to determine maintainability and merits of the case has however been postponed to March 10.

The court has also continued the stay granted to Vodafone and has not found it necessary to request VIHBV to file any further documentation at this point.

The income tax department had slapped a notice on Vodafone in August 2007 seeking around $1.7 billion as capital gains in the $11.2-billion sale of Hutchison Telecom International Ltds 67% stake in Hutch-Essar, now renamed Vodafone-Essar. In a showcause notice, the department had asked Vodafone why it should not be treated as an agent of HTIL.

However, the company had approached the Mumbai High Court contesting this notice. According to Vodafone Essar, Vodafone, CGP Investments (a Cayman Islands based company from HTIL which sold the stake in HTIL) as well as HTIL are all foreign companies. The transactions involved in the stake sale were structured through Mauritius, so the capital gains cannot be considered to have accrued in India. Also the incidence of tax does not arise as India and Mauritius have a double taxation avoidance treaty, Vodafone has said.