No tax dues in India, claims Vodafone CEO

Written by fe Bureau | New Delhi | Updated: Jul 30 2010, 09:21am hrs
British telecom multinational Vodafone on Thursday asserted it does not have any tax dues in India. The I-T department has demanded $2 billion from the company as capital gains tax on account of the Vodafone-Hutch deal. Vodafone chief executive Vittorio Colao said here: We continue to be convinced and advised that no tax is due. We have made an acquisition in this country. We have not sold assets.

Colaos statement came just before the British chancellor of the exchequer George Osbornes meeting with finance minister Pranab Mukherjee.

The Vodafone tax matter was discussed at the meeting, say sources. Vodafone has mounted a legal challenge, arguing the income tax department doesnt have jurisdiction to tax the Vodafone-Hutch deal, which was structured as a transaction between two corporate entities outside India. Vodafone was based in Netherlands and Hutchison was incorporated in Cayman Islands.

The tax department had asked Vodafone to pay tax for its $11.2-billion acquisition of a controlling stake in one of Indias largest cellphone companies in 2007. The tax departments contention is that Hutchison made capital gains in the deal, and while paying Hutchison for the stake, Vodafone should have deducted tax on it.

The court hearing of Vodafones appeal is scheduled for August 2. The department issued a show-cause notice to Vodafone in 2007, which it challenged before the Bombay High Court. After the Court dismissed Vodafones petition, it moved Supreme Court in January 2009.

SC sent the case back to I-T department, to decide first whether the latter had the jurisdiction, given the fact that both Vodafone and Hutchison are based abroad.

Colao said he was confident of Indias judicial process resulting in a favourable outcome for the company. There could be some movement in the case with some pressure from the UK government in favour of Vodafone. UKs business secretary Vince Cable had said that Osborne will bring up the Vodafone tax issue before the Indias finance minister. He added that India needs to send a message to UK investors clarifying tax matters.