The Vodafone case, the most followed tax controversy in recent times, took centre-stage in the Budget with the Finance Minister, Mr Pranab Mukherjee, on Friday moving numerous amendments to the income-tax law to reverse the Supreme Court ruling on the matter.
If the amendments were to be enacted into law, Vodafone could face a tax bill of at least $2 billion for the near $11.2-billion deal with Hutchison in 2007. The taxman will also laugh all the way to the bank on a spate of deals involving indirect transfer of shares abroad, but deriving values substantially from assets located in India.
The Supreme Court had, in the Vodafone case, ruled that gains derived from transfer of shares of a foreign company cannot be taxed in India, even if the value of shares is substantially derived from assets located in India. Now, the Government has come up with a spate of amendments, that too on a retrospective basis from April 1962, to bring Vodafone-Hutchison type transactions into the tax net. The amendments are being proposed as part of the Finance Bill 2012.
Meanwhile, telecom major Vodafone said in a statement: “We are examining this proposed decision with our lawyers, but we do not believe this retrospective change in tax law should have any impact on the final judgment handed down by the Supreme Court in our tax case. We continue to have faith in the Indian judicial system.”