Reprieve for Vodafone

The Supreme Court today asked British telecom company Vodafone to file its representation before the income tax authorities against the penalty proceedings against it. The court said if the tax department imposes penalty, no steps will be taken to enforce it. The main case is already before the Supreme Court.

The bench headed by Chief Justice S H Kapadia issued the order when the company mentioned the penalty proceedings against it in the $2- billion tax demand related to the purchase of shares in Hutchinson Essar.

When Vodafone’s counsel Harish Salve mentioned the case, the judges observed that penalty proceedings are at an initial stage and only notices have been issued in March. So it can appear before the authorities.

Both parties are already fighting a case in the Court over whether the Income Tax department had the jurisdiction to tax the $11.2 billion deal where Vodafone bought 67 per cent controlling stake from Hutchison. The company is now called Vodafone Essar and is the second largest telecom company in India. The case will come up for hearing on July 19.

While the I-T department had calculated Rs 11,218 crore as tax liability of Vodafone, last month it sent a notice to the company saying it would seek a further penalty.

The I-T authorities invoked Section 271 of the Income Tax Act where a company or an individual has to pay a penalty if one failed to furnish returns, comply with notices or had concealed income.