Idea Cellular to challenge tax orders

I-T sent tax assessment orders to Idea Cellular, its subsidiary-Aditya Birla Telecom-accounting to Rs 3,900 cr

Aditya Birla group company, Idea Cellular today said they would look at the option of challenging an Income Tax department order, which it believes is 'unjustified' and 'erroneous'.

The IT department sent tax assessment orders to Idea Cellular and its subsidiary, Aditya Birla Telecom, accounting to Rs 3,900 crore, on Sunday.

'The demands are inconsistent with established tax laws and past precedents. The company believes the demands are unjustified and based on erroneous interpretation of current tax laws and the facts of the case,” the company said, in response to a questionnaire.

Idea Cellular remained tight lipped about the reasons behind the IT order. It is known through unconfirmed reports that the orders pertain to transfer of assets and licences between Idea Cellular and Aditya Birla Telecom, in 2009.

The IT department labelled these transfers as 'slump sale', and believes that it resulted in capital gains. While Idea was slapped tax of Rs 1,500 crore, Aditya Birla Telecom was sought Rs 2,400 crore.

“These demands are misplaced and no tax is applicable. Idea Cellular has always maintained the highest standard of tax compliance. The company is  evaluating all options including challenging the demand at the appropriate forums,” the company said.  

A company official said that they the transfer of licences has been approved by High Court and legalities are in place. If this tax order leads to a court battle, it would be the second telecom company that IT department would be fighting after British telecom major, Vodafone Plc. IT department claims that Vodafone owes tax accounting to Rs 14,200 crore with interest, for a 2007 deal with Hutchinson.

In the recent past, the IT department slapped notices on many companies over alleged gains made via transfers within group. Oil major Shell India was slapped a notice of Rs 5,000 crore over inter-group transfer of shares. Apart from the Hutch deal demand, IT department also sent yet another tax order to Vodafone involving a share subscription to an overseas company in February.

The AB group owned Idea Cellular and its subsidiary Aditya Birla Telecom were sent tax orders, amounting to Rs 3,900 crore in total. While the company confirmed that it received assessment orders from tax department, it has not specified the reasons behind the same.