Legal Blog: Supreme Court asks Vodafone to deposit Rs.2,500 crore

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Tuesday, November 16, 2010

Supreme Court asks Vodafone to deposit Rs.2,500 crore

Source : Thaindian.com

The Supreme Court Monday asked telecom major Vodafone to deposit, within three weeks, Rs.2,500 crore as a component of its tax liability on its transaction with Hutchinson International Ltd. for acquiring its India operations Hutch Essar.

The apex court bench of Chief Justice S.H.Kapadia, Justice K.S. Radhakrishnan and Justice Swatanter Kumar asked the telecom giant to give a bank guarantee of Rs.8,500 crore for the balance tax liability calculated against it by the tax authorities.

The court said that Rs.2,500 crore should be deposited within three weeks and bank guarantee of Rs.8, 500 crore be given within eight months. The bank guarantee has to be from a nationalised bank.

The court said that if Vodafone succeeds in its case, the tax authorities would refund the excess amount with interest to be decided by the apex court.

Appearing for Vodafone, senior counsel Harish Salve said that after apportionment, its tax liability comes to Rs.1,330 crore. This was countered by Attorney General G. Vahanvati, who argued that the total tax liability was to the tune of Rs.11,000 crore.

The court then asked Vodafone to deposit an amount of Rs.2,500 crore and give a bank guarantee of Rs.8,500 crore.

Vodafone has challenged the Bombay High Court verdict that asked the tax authorities to go ahead with the assessment of the tax liability of telecom giant arising out its acquisition of India operations of Hutch Essar.

Vodafone has contended that it did not attract the jurisdiction of the Indian tax authorities as Vodafone PLC is a Netherlands based and Hutchinson International Ltd. was Hong Kong based.

It has also contended that the transaction of Vodafone acquiring Hutch Essar too took place on foreign soil.

The entire deal between the two telecom giants was to the tune of $11 billion and the tax liability works out to be $2 billion. Upon conversion in rupee, the tax liability along with interest component works out to be Rs. 11,128 crore, the tax athorities have claimed.

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