Tax authorities have begun scrutinising offshore mergers and acquisitions by India Inc, following the Bombay High Court?s decision in the Vodafone tax case, earlier this month. The Central Board of Direct Taxes has asked its field formations to begin gathering information on similar transactions that have taken place in the recent past.
?We have begun preliminary investigations. We need to compile information as many of these offshore deals have not even been reported to the tax department so far,? Saroj Bala, member CBDT said.
But the Board will wait for the Supreme Court?s decision on the expected appeal by Vodafone, before initiating any official action or sending show cause notices to other companies.
The Bombay High Court on December 3 dismissed a petition by Vodafone International Holdings BV challenging a show cause notice by the income tax department. The department had asked the telecom major to pay $1.7 billion as capital gains tax for its acquisition of a 52% stake in Hutchisson Essar (now Vodafone Essar) in 2007. But the court has given it time to file an appeal in the Supreme Court and has continued a previous stay on the I-T department?s show cause notice for another eight weeks.
Sources said the department has already zeroed in on nearly 400 similar transactions and about eight prior cases have also been re-opened. In an indication that the department hopes to claim tax on all such deals, CBDT chairman had said that the high court?s decision has strengthened the hands of the income tax department. ?It will continue its attempt to bring to tax in India transactions involving transfer of assets situated in India between entities located outside the country,? he had said at that time.