Not an agent of Hutch, Vodafone tells HC

Vodafone said on Friday it had filed a petition in the Bombay High Court defending itself against a new step by tax authorities treating the telco as an “agent” of the seller in its $11-billion (about Rs 50,000 crore) takeover of Hutchison Telecom in 2007. The Bombay High Court had earlier dismissed a petition filed by Vodafone and ruled that the tax office had jurisdiction to tax its 2007 deal.

The case relates to a deal in 2007 when Vodafone, through its group firm Vodafone International Holdings, bought Hutchison Telecommunications India’s (HTIL) stake in Hutchison Essar for over $11 billion. The Income Tax Department (I-T Dept) held Vodafone liable for not deducting tax at source from the payment made to Hutchison and claimed around Rs 12,000 crore in tax and penalty on the deal.

In a statement, Vodafone said the tax office has now initiated a different process — treating Vodafone as an “agent” of the seller. To protect its position, Vodafone filed on Friday a writ with the Bombay High Court defending itself against these new steps being taken by the tax office. Vodafone had appealed to Supreme Court over the tax authorities’ jurisdiction to tax the deal, after the Bombay High Court dismissed its petition.

The Supreme Court has set a date on October 25 for hearing Vodafone’s appeal challenging the HC ruling. “The tax office’s actions are an unusual development, not least because they ignore the imminent hearing at the Supreme Court on the jurisdiction issue,” Vodafone said.

“Vodafone contends that the key issue of jurisdiction (as to whether the Indian tax office can tax the transfer of a foreign company’s shares between two non-residents) is currently under appeal to the Supreme Court of India,” the company said in a statement. Hence, any action which seeks to treat Vodafone as an ‘agent’ of Hutchison is misguided and premature, it said.