No capital gains in Hutch deal; no tax payable: Vodafone

Sticking to its claim that it does not have a tax liability, Vodafone today said it made no capital gains in the $11 billion (about Rs 50,000 crore) Hutchison buyout deal and would take necessary action to defend its position.

The Supreme Court today gave the tax department four weeks to work out the liability it is claiming from UK-based Vodafone Group Plc for buying Hutchison Whampoa's telecom business. The deal involved the Hong Kong-based company's wireless assets in India.

The next hearing of the case will be on October 25.

The tax department had raised a demand of Rs 12,000 crore from Vodafone.

Vodafone has appealed against the September 8 verdict of the Bombay High Court, which ruled that authorities in India have jurisdiction to seek taxes from Vodafone International Holdings BV on its 2007 purchase of Hutchison's Indian wireless operations.

"We firmly believe that this transaction is not subject to tax in India. Furthermore, as Vodafone is the acquiring company, we have clearly not made any capital gain on the sale. We will continue to take whatever actions necessary to defend Vodafone¿s position as the matter proceeds," Vodafone said in a statement.

The Bombay High Court, earlier this month, dismissed Vodafone's petition, but said Indian tax authorities would not issue a final order for the next eight weeks.

"We are pleased that the Supreme Court has decided to hear Vodafone's appeal against the recent Bombay High Court verdict on the issue of jurisdiction.

The Indian Tax Authority has been ordered to determine the potential liability and place it before the Supreme Court on the 25th October 2010. The Supreme Court will then decide on whether the relief in Vodafone's favour continues.