If there is an important fallout of the Supreme Court's Vodafone judgment, it is that the time taken to conclude cross-border deals or offshore transactions involving Indian assets will come down.

This will be the case to the extent that the structure adopted in such deals follows the Vodafone transaction or the principles enunciated in the Vodafone judgment, say tax experts.

The time taken for concluding cross-border deals is expected to come down as the parties involved in the transactions will not spend considerable time in sorting out tax indemnity issues, applying for advance rulings, withholding tax certificates, etc. “Tax indemnities will not be phased out as a corollary to the Vodafone judgment. The extent of significance of tax indemnities would depend upon extent of applicability of Vodafone judgment and principles settled by it. But the time taken will come down as the Vodafone judgment has settled certain principles of law,” Mr Amit Singhania, Principal Associate, Amarchand & Mangaldas, told Business Line .

Currently, parties involved get into negotiations, consuming significant time on who would control litigation, what would be the point of invocation of indemnity and other issues. This is all the more required to deal with situations where notices are served by revenue authorities on the buyer for not withholding tax or making them the representative assessee. Time spent on such aspects can be productively utilised with the apex court ruling on Vodafone establishing that transfer of shares between non-residents would not be subjected to tax here even if the underlying assets are situated in India.

Mr Amrish Shah, Partner and National Leader for Transaction Tax, Ernst & Young, said that the time taken for concluding cross-border deals will come down post the Vodafone judgment.

More claims

Another fallout of the judgment is that the Revenue Department will now get more refund claims from those non-residents who deposited tax for transactions similar to the Vodafone-Hutch deal.

“The Vodafone judgment will have impact on revenue not only on account of refund of the deposit paid by the telecom giant but it will attract the refunds in other similar transactions,” Mr Singhania said, adding that a sizeable number of offshore transactions involving Indian assets have happened since 2007 post the Vodafone-Hutch deal.

Mr Amrish Shah said that the number of transactions similar to Vodafone-Hutch deal size may not be that many, but certainly sellers will now claim refunds of tax withheld in offshore transactions.

Reacting to the Vodafone judgment, Mr Rohan Shah, Managing Partner, Economic Laws Practice, said that the judgment takes a clear position on India's territorial jurisdiction to tax. It holds that transfer of shares outside India is not taxable in India.

The verdict will bring a certainty in the minds of global investors regarding Indian tax consequences in case of sale of their investments, said Dr Suresh Surana, Founder of RSM Astute Consulting Group.

>krsrivats@thehindu.co.in

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