The Supreme Court will, on Friday, pronounce the verdict on a $2.6-billion (Rs 11,297 crore) demand by the Income-Tax Department on Vodafone's $11.2-billion acquisition of Hutchison's Indian telecom assets.

The high-profile case is being keenly watched by many across the globe as the apex court order is expected to have ramifications on India-related acquisitions and foreign investments into the country. The final hearing in the case had begun before a three-judge Bench headed by the Chief Justice, Mr S.H. Kapadia, in August last year.

The case involves the Netherlands-based Vodafone International Holdings BV (VIH), a subsidiary of the UK-based Vodafone Group, acquiring a 67 per cent controlling stake in the Cayman Islands-based CGP Investments Ltd that held the Indian telecom assets (Hutchison Essar) of the Hong Kong-based Hutchison Whampoa. The shares in Hutchison Essar were held through companies based in Mauritius and India.

Tax at source

The I-T Department says Vodafone failed to deduct tax at source while acquiring the controlling stake. Earlier, the Bombay High Court had said the I-T Department has the jurisdiction to claim the tax on Vodafone's acquisition of Hutchison's mobile business in India as the underlying assets were in the country. Vodafone had moved the Supreme Court against this order denying any tax liability as the deal was between two foreign entities and was done offshore. During the final hearing, which commenced in August last year, Senior advocate Mr Harish Salve, representing Vodafone, said the complex structure of the deal had not been created to avoid tax payments as claimed by the I-T Department.

In November 2010, the Supreme Court had directed Vodafone to provide deposit and bank guarantee of around Rs 11,000 crore. The apex court asked Vodafone to deposit Rs 2,500 crore with the Supreme Court Registry and submit a guarantee from a nationalised bank for the remaining amount of around Rs 8,500 crore.

arun.s@thehindu.co.in

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