Vodafone International Holdings Case 2008: Analysis, Impact
Synopsis Submitted by:
Recently, the Hon’ble Bombay High Court dismissed the writ petition filed by Vodafone Holdings against the show cause notice (‘notice’) issued by the Income-tax department for failure to withhold tax on the amount paid for acquiring a stake in Hutchison Essar Ltd., which could have huge ramifications in the international tax scenario in India.
In February 2007, Vodafone Holdings acquired a controlling stake in Hutchison Essar Limited (‘HEL’ now Vodafone Essar Limited) from Hong Kong based Hutchison Telecommunications International Limited (‘HTI’) by acquiring shares of CGP Investment (‘CGP’), a Cayman Island Company (which was belonging to HTI). CGP held various Mauritius companies who held 67% stake in HEL.
In September 2007, the Income-tax department had issued a notice on Vodafone Holdings for failure to withhold tax on the amount paid for acquiring the said stake as it believed that HTI was liable for capital gains it earned from transfer of shares of CGP as CGP indirectly held stake in HEL.
Vodafone Holdings had filed a writ petition in the Bombay High Court challenging the said notice contending that the Income-tax department had no jurisdiction over the transaction as the transfer of shares had taken place outside India between two companies incorporated outside India and subject of transfer were shares, whose situs was outside India.
The argument made by Vodafone Holdings is that since the shares procured by it are shares of a non-resident company, the capital gains arising to HTI in connection with this transaction are not liable to tax in India.
odafone's submission's view on "person" says that only a person who has a factual or taxable presence in India can be made liable to deduct tax in India.
It adds that the Indian Parliament being a sovereign and plenary... [continues]
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