Vodafone hutch case study tax

case on merger acquisition of hutch and vodafone

Vodafone, however, told the court it would not submit to the jurisdiction of the court in relation to the Rs 11, crore tax demand. Vodafone argued that the deal was not taxable in India as the funds were paid outside India for the purchase of shares in an offshore company that the tax liability should be borne by Hutch; that Vodafone was not liable to withhold tax as the withholding rule in India applied only to Indian residence that the recent amendment to the IT act of imposing a retrospective interest penalty for withholding lapses was unconstitutional.

vodafone case study analysis

So where did it all begin? But is it really a capital asset which was in India. Not only that that, it was the assumption of the Department, they had issued circulars on that basis, that tax deduction provisions do not apply outside India, even if overseas income were taxable in India.

HTIL said it had received a draft assessment order from the Income Tax Department on November 24, alleging gains made on sale of its entire stake in the India business to Vodafone. Pursuant to Section 9 1 of the Act, income is deemed to accrue or arise in India if such income is due to transfer of an asset situated in India or through or from business connection in India.

Vodafone hutch case study tax

Is there an argument to say that the sale consideration that was paid-obviously what Suzuki will be paid by Toyota; it will include the value of the business in India, it will include the value of the business everywhere the Suzuki operates - so is there going to be an argument now that consideration should be split and to the extent the consideration relates to Suzuki's Indian business that is taxable in India. Investors in Vodafone will be interested to know that the reported profits do indeed exist. This is what has been challenged by the Centre on December 12, However, the recent notice sent by the IT Department appears to change the position and appears to result in extra-jurisdictional taxation. The issue really is that it will definitely open up a lot of issues for Indian investors investing abroad if a similar transaction was sought to be taxed by the tax authorities in other countries; we had a situation where in the context of some other provision, particular position was taken by the tax authorities and some other country decided to tax the software companies abroad and that issue had to be resolved ultimately through mutual bilateral talks and to bring an end to that. Today we are doing transactions offshore, what do we tell people? So why did the department change its stand. But is it really a capital asset which was in India.

The tax officers are saying that Hutch is taxable on the profit they made from the sale - that is one aspect. Today we are doing transactions offshore, what do we tell people?

vodafone case citation

I think it creates a great degree of uncertainty and even if the Tax Department wants to go after taxability of these transactions, I think we need to divorce the procedural issue of tax deduction at source from the arguments on whether or not the transaction is taxable and be a little more realistic and rational to bring in certainty to transactions rather than bring in an element of uncertainty here.

Therefore a different battle will start once that tax return is filed or if a notice is issued and Hutch decides to challenge the jurisdiction of the notice itself.

But the tax department disagreed.

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All you need to know about Vodafone tax case