Vodafone did not provide vital documents: Taxman

The Income-Tax (I-T) department has accused Vodafone of not providing important documents, including the agreement to acquire Hutchison Telecommunications International's (HTIL) stake in GSM major Hutchison Essar.

One of the crucial documents required by the I-T department to assess tax was the primary agreement dated February 11, 2007. This agreement (to acquire HTIL’s 67 per cent interest in Hutchison Essar) was required to assess the nature of the deal, I-T department’s counsellors had informed the Bombay High Court during the course of the case.

The agreement would have mentioned the total consideration paid to HTIL, based on which the department would have been able to assess the capital gains tax. The I-T department had also argued that since this document is not presented before the court, the writ petition filed by Vodafone "should not be entertained owing to the conduct of the petitioner (Vodafone)".

The department also stated that the transaction is prima-facie taxable in India since it amounts to "transfer of a capital asset in the country". On its part, Vodafone argued it had not acquired any assets in India. It also stated that the company did not suppress "any vital documents" as alleged. It stated that there was no question of furnishing any document as the department did not seek for any papers.

"If, according to the respondents (I-T department), the said agreement was vital to the determination of any issue they ought to have sought inspection of the same in the course of the proceedings and the petitioner (Vodafone) would have offered inspection and/or copies of the same," Vodafone lawyers said in the court.

Meanwhile, in a statement issued here, Vodafone said, "The exact details of the basis of the order will now be evaluated by Vodafone. Vodafone confirms that it intends to appeal to the Supreme Court of India within the eight weeks granted by the Bombay High Court."

"Vodafone, based on advice received, continues to believe that the transaction is not subject to tax in India and is confident of a positive outcome ultimately," it added.

On Wednesday, the HC dismissed a writ petition filed by Vodafone challenging the I-T department’s jurisdiction to assess if the over $11-billion Hutchison-Vodafone transaction was liable for capital gains tax. It is estimated that Vodafone will have to pay around $2 billion as capital gains taxes.