Voda to deposit Rs 2,500cr -SC

Agrees To Hear Telco’s Plea In Tax Case But Asks It To Secure Rest Of Rs 8.5K Cr

New Delhi: Agreeing to hear Vodafone’s appeal challenging a Bombay High Court order validating nearly $2 billion capital gains tax on its $11-billion acquisition of Hutch, the Supreme Court on Monday directed the Dutch telecom giant to deposit Rs 2,500 crore within three weeks.

A Bench comprising Chief Justice S H Kapadia and Justices K S Radhakrishnan and Swatanter Kumar also asked Vodafone to secure the rest of the demand, that is Rs 8,500 crore, by providing bank guarantee of a nationalised bank within eight weeks.
Vodafone’s counsel Harish Salve, who vehemently ity, agreed with the interim order as the Bench repeatedly asked the Dutch company whether it had ever offered to compartmentalise the capital gains — in India and foreign land — before the authorities.
However, attorney general G E Vahanvati questioned the way Vodafone acquired 67% of Hutchison Telecommunications International Ltd (HTIL) and tried to give an erroneous impression that only 13% of it was acquired in India, and hence only this part was liable to capital gains tax.
Vahanvati said the total amount due was Rs 11,000 crore and if one took the prinquestioned the manner of
computation of capital gains tax by the assessing author cipal amount due, that is Rs 7,000 crore, then the appeal should be heard only after Vodafone deposited at least half the amount, that is Rs 3,500 crore.
Salve said the income-tax department had adopted a curious approach in this case and had erroneously termed the transfer of share capital from HTIL to Vodafone as capital gain.
Salve continued to argue that Vodafone had a good case to show to the court that very little was payable in terms of capital gains tax as the whole transaction was nothing but upstream transfer of shares from one company to another.