Vodafone International has filed a petition in the Supreme Court to block penal action initiated by the Income Tax authorities on the contested $2.5-billion tax bill relating to its 2007 acquisition of a controlling stake in the erstwhile Hutchison-Essar.
The UK-based telecommunications giant, which has lashed out at what it terms ‘the unpredictable nature of India's taxation policy', expects the apex court to hear its plea on April 7. The I-T Department had issued a notice to Vodafone on March 23 initiating penalty proceedings against the company for not deducting tax at source from payments made to Hutchison as part of its $11-billion acquisition in 2007.
Vodafone's plea against the tax notice itself is still pending for hearing in the apex court.
“It is difficult to understand the rationale behind the tax authorities seeking to impose penalties on a matter which the tax authorities have, themselves, described as a ‘test case', ” said a statement from Vodafone.
If tax liability is established, Section 271C of the Income Tax Act calls for penalty of up to 100 per cent of the amount of tax that was not deducted at source.
“All the advice received by Vodafone during and since the acquisition is that there is no tax or therefore penalty that arises…,” the Vodafone statement said.
Vodafone spokesperson Mr Simon Gordon told Business Line that the company has approached the Supreme Court since the apex court had recently asked the I-T Department to refrain from taking further steps on the case until its next hearing, scheduled for July 19.
Vodafone was compelled to approach the Supreme Court after the Bombay High Court, in September last year, ruled that the Tax Department has jurisdiction over tax bills in cross-border mergers, setting a precedent for overseas firms looking to buy into Indian companies.