SC asks Vodafone to appear before IT in tax case

The Supreme Court today directed UK-based telecom major Vodafone to appear before the Income Tax Department which had instructed the company to pay penalty in the $2 billion tax case relating to the telecom major's stake purchase in Hutchison-Essar.

A three-judge bench headed by Chief Justice S H Kapadia asked the company to file its representation before the IT department. "We direct the company to file its representation before the official concerned in this case. ..The officials would proceed in the matter," the court said.

Meanwhile, the court also made it clear that if the IT Department passes any order for penalty, it would not be enforced till Supreme Court's further order as the main matter of tax dispute is still pending in the apex court.  

"No steps would be taken to enforce a penalty if imposed on the petitioner," the court said.

During the proceedings, the Supreme Court told telecom major Vodafone that tax penalty is at an initial stage because only notices have been issued till now by the IT Department to the company.

"They (IT Department) are asking you (Vodafone) to appear only. You go and appear and put your representation their. Let them pass order," the bench said.

Earlier, the I-T department had issued notice to Vodafone in March saying penal action would be initiated against the British telecom major in the tax case. Vodafone in 2007 had purchased 67% stake of Hutchison in Hutchison—Essar for over $11 billion. 

The Income Tax (I-T) Department had raised a demand of about $2 billion on Vodafone as it failed to deduct (withhold) tax at the time of stake purchase.

The I-T department had on March 23 sought to penalise Vodafone International, the holding company of Vodafone Essar, for failure to present Cayman Island income tax returns and certain other documents.

The I-T department had asked for these documents between January and October 2009. Earlier, the apex court had directed Vodafone to submit Rs 2,500 crore and along with a bank guarantee worth Rs 8,500 in the Rs 11,000 crore tax demand by the IT officials.