Tags:
Journalism of Courage
The Supreme Court delivered a landmark judgment that the income tax department did not have jurisdiction to tax Vodafones 11.07-billion acquisition of Hutchisons 67 per cent stake in its Indian telecom joint venture with the Essar Group in May 2007. It upheld the rule of law,by looking at the deal through the Income Tax Act as it stands today,instead of looking through the deal to reflect the governments policy intentions. They were closely tracking the case not because of the Rs 11,217.95-crore tax claim the department had slapped on Vodafone or even because the fate of over 300 such big Mamp;A deals impinged on its outcome but primarily because the cases uniqueness called on question the fair play of judiciary in interpreting existing laws.
The apex court sifted the facts to drive home the point that the acquisition was neither a preordained one nor a sham transaction and said that the department cannot deny genuine strategic tax planning. It pointed out that the shares of CGPC,a company in Cayman Islands which held a Mauritius company,which in turn held several other Mauritian companies which finally held majority stake in Hutchison Essar Ltd acquired by Vodafone International Holdings BV,a Dutch firm,resided in Cayman Islands. Hence,tax authorities in India did not have jurisdiction over the deal. This will reassure global investors that the legal system works just fine in India. Delivering the majority judgment,Chief Justice S.H. Kapadia said,Certainty is integral to rule of law. Certainty and stability form the basic foundation of any fiscal system. Tax policy certainty is crucial for taxpayers including foreign investors to make rational economic choices in the most efficient manner.
