Vodafone asked to pay TDS

DIFFERENT STROKES

After Vodafone Essar filed a writ petition in the Bombay High Court challenging a notice from the income-tax department, an income-tax official said Vodafone is guilty of not deducting tax at source (TDS) while paying Hutchison Telecommunications International Limited (HTIL) for a majority stake in Hutchison Essar.

Hutchison Essar was renamed Vodafone Essar after the UK telecom major bought 67 per cent in India's fourth-largest service provider for $11.2 billion earlier this year. Vodafone bought out CGP Investments, registered in the Cayman Islands, which was wholly owned by HTIL.

"Income derived in India directly or indirectly is taxable in India. While the recipient (HTIL) is the final taxpayer, Vodafone failed to discharge its tax liability," said G C Srivastav, director general (International Tax), finance ministry.

"Vodafone is payer in this case. So, it has the liability of a payer," Srivastava said.

The income-tax department has sent a notice on September 7 to Vodafone seeking capital gains tax related to the sale of HTIL's stake in Hutchison. No notice, however, has been issued to HTIL so far.

"The tax liability lies with the company making the payment. First, we will handle it. Then we will think of the seller, HTIL," Srivastav said.

Last week, Vodafone CEO Arun Sarin, who is also the vice-chairman of Vodafone-Essar, had said the company was not liable to pay tax.

"We are working with the income-tax department to sort out this issue. Neither the Essar Group nor Vodafone nor Vodafone Essar is liable to pay taxes. It is the seller who should be taxed; and the seller is not one of the parties represented here," Sarin had said.