With the Income Tax Authorities raising a demand for Rs 12,000 crore tax, telecom giant Vodafone today asserted that no tax was payable on the $11.1 billion deal it did with Hutchison in 2007.
The mobile operator also said it is considering to appeal to the Bombay High Court to legally challenge the claims of the IT department.
The Income Tax department on Friday had asked Vodafone to explain why it should not be taxed Rs 12,000 crore for its $11.1 billion deal with Hong Kong-based Hutchison in 2007 for acquiring its assets (majority stake) in the Indian joint venture with Essar.
"Vodafone is considering its next move, which includes an appeal to the Bombay High Court -– as per the Supreme Court’s decision -– to legally challenge the validity of the order on the preliminary issue of jurisdiction," Vodafone said.
The tax authorities had called Vodafone for a hearing on June 14, 2010, to discuss the potential quantification of any tax on the Hutchison acquisition.
"Whilst an amount of tax has been suggested by the tax authorities, it is important to note that this is not a demand for payment... Vodafone remains confident that there is no tax to pay on this transaction," it added.
The dispute concerns Vodafone Group Plc's acquisition of a 67 per cent stake in Hutchison Essar from Hong Kong's Hutchison Telecommunications International Ltd. The I-T department is of the opinion that the transaction is taxable in the country.
Earlier, Vodafone had also approached the Supreme Court, which had refused to intervene in the tax dispute between the telecom firm and the I-T department and had asked the department to check whether it has the jurisdiction to proceed further in the tax case.
Vodafone had paid $11.1 billion for Hutchison's 67 per cent stake in Hutchison-Essar (since renamed Vodafone Essar) in 2007.
The government approved the deal in May, 2007, itself.
After regulatory clearances were given, the tax department issued a show-cause notice to Vodafone saying the company did not deduct tax, estimated at around $2 billion.
In 2007, Vodafone received a show-cause notice asking why it had not done this. Following this, the company approached the Bombay High Court.
After the high court dismissed Vodafone's petition challenging the I-T department's notice, the company moved the Supreme Court in January, 2009.
The Supreme Court granted Vodafone the right of appeal to the Bombay High Court if it disagreed with the tax authorities' determination.