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Monday, November 15, 2010

Supreme Court Directed Vodafone to Deposit Rs.2,500 crore in 3 Weeks

November 15, 2010

NEW DELHI: The Supreme Court on Monday (November 15) directed telecom major Vodafone to deposit Rs. 2,500 crore ($550 million) as part of a tax liability within 3 weeks for the acquisition of the Hutchinson stake in the Hutchinson-Essar telecom joint venture firm in 2007, while it challenges a tax bill for the country’s largest cross-border deal.

Supreme Court Bench Chief Justice S.H. Kapadia directed the Telecom giant Vodafone to provide a bank guarantee of Rs.8,500 crore to the government and the cash amount of Rs.2,500 crore. The cash has to be deposited within a three week time while the bank guarantee within eight weeks.

According to the court, the deposit will be returned with interest if Vodafone wins the legal dispute. India’s tax department raised the tax demand of 112 billion rupees on Vodafone’s purchase of Hutchison Whampoa Ltd.’s Indian mobile-phone unit three years ago. However, Vodafone has maintained that no tax is payable as the transaction was executed outside the country and the Indian tax authorities have no right to seek tax.

In September, IT dept on the direction of Supreme Court raised the tax demand of Rs. 11,217.95 crore on Vodafone International holdings BV treating it as an assessee in default for failure to deduct tax as required before making a payment of $11,076 million (about Rs. 55,000 crore) to Hutchison Telecommunication International Ltd.

IT Department treated Vodafone as an assessee in default under Section 201(1) of the Income Tax Act, 1961, for failure to deduct tax as required under section 195 of the Act. SC on September 27 directed the Vodafone to pay the tax within a month. February 24, 2011 has been fixed as the final date for Vodafone hearing by the Supreme Court.

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