I-T can tax Vodafone-Hutch deal: Tribunal

In a ruling which may have major tax implications for telecom giant Vodafone,the Mumbai Income Tax Appallette Tribunal today ruled that the income tax authorities...

In a ruling which may have major tax implications for telecom giant Vodafone,the Mumbai Income Tax Appallette Tribunal today ruled that the income tax authorities in India have jurisdiction to tax capital gains arising from the sale of shares of Hutchison Telecom International,now Vodafone,in the $11.2 billion deal.

Income Tax department has passed the order under section 201 (1) and 201 (1A) determining that it has jurisdiction to bring to tax the amount of capital gains arising from sale of shares of Hutchison-Essar. The department is,however,yet to quantify the amount of tax, a source told The Indian Express.

The source said the order followed a directive from the Supreme Court earlier given in an appeal filed by Vodafone against the Bombay High Court order.

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The SC had directed that tax department should give its finding on whether it has jurisdiction to bring the amount to taxation.

The SC had also directed if Vodafone had any grievance with the order of the IT dept,it could approach the Mumbai HC directly.

When contacted,Vodafone confirmed the development,and said,We have received an order from the tax department today on the preliminary issue of jurisdiction. We are fully confident that no tax is payable by Hutchison on this transaction and that Vodafone has no liability in any event; and all of the taxation and legal advice received continues to be consistent with this view.

There are estimates that the telecom company may have to cough up around $2 billion as capital gains tax.

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The company was served show-cause notices by the tax department regarding the tax payment but the Netherlands-based telecom giant has been maintaining that the Indian tax authorities do not have jurisdiction to tax the deal. Hutchison is incorporated in the

cayman Islands.

The order will have ramifications for similar offshore deals in which one or both the companies concerned are not resident in India.