The government today sought a review of the Supreme Court verdict quashing the Income Tax department’s Rs 11,000-crore tax demand on Vodafone. In its petition before the apex court, the government argued the court’s January 20 order setting aside the Bombay high court judgment, which was in favour of the tax demand, was based on wrong provisions of the Income Tax Act.
Government officials appeared optimistic the petition, highlighting five moot points in the verdict, would be accepted but tax experts said there was a low probability of that.
The court had ruled Vodafone had no obligation under section 163 clause 1 (c) of the I-T Act to pay the tax. The government in its petition argued the tax notice to Vodafone was issued under the inclusive clause of section 163 and not under 163 clause 1 (c), as considered by the court. It further said the provisions of the proposed Direct Taxes Code were wrongly interpreted by the court.
| REVIEWS AND RESULTS A review petition is heard by the same judges who pronounced the earlier judgment. It is usually taken up in chambers, not in an open court, and examined to see if there is an “error apparent on the record’’ |
| * ANTULAY CASE: A famous case where the court granted hearing in an open court in the 1980s. A constitution bench reversed the earlier order |
| * NORTHERN INDIA CATERERS CASE: In 1980, the govt filed a review in the sales tax case of Northern India Caterers. Its petition was dismissed |
| * ITC CASE: The government filed a review petition on Oct 7, 2004 against an order granting tobacco giant ITC excise duty relief in a Rs 803-crore tax dispute. The SC dismissed the petition on Mar 3, 2005 |
| * BHOPAL GAS CASE: On May 11, 2011, the SC dismissed CBI’s curative petition against its earlier order 14 years back. While the criminal curative petition was dismissed, the civil curative petition is pending |
| * BLACK MONEY CASE: The govt approached the SC, seeking a review and recall of its order of July 4, 2011 for setting up a special investigation team to probe all black money cases. The case was referred to the Chief Justice |
Finance ministry officials said various submissions made by Solicitor General Rohinton Nariman in the case were not considered. The government stressed the motive behind bringing the deal under taxation was to curb the flow of black money by checking tax evasion. It also said contrary to the concerns raised by the court about foreign direct investment flows into the country, the deal did not bring any FDI (foreign direct investment).
In his ruling, Chief Justice S H Kapadia had said the transaction was a “bona fide structured
FDI investment into India, which fell outside India’s territorial tax jurisdiction”.
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In a media statement, Vodafone said the Supreme Court “clearly and unambiguously” ruled there was no tax to pay on the Vodafone-Hutchison transaction.
“Foreign companies come into India on some assumptions, including the taxes they have to pay. Tax uncertainties make the business environment unfriendly for them. Vodafone did not make any gains… The Income Tax department is seeing a huge loss because it is not about the Vodafone case alone; it will have repercussions on other cases as well,” said Neeru Ahuja, partner, Deloitte Haskins and Sells.
The government is said to be thinking of raising similar tax demands in other cases such as the Idea Cellular-AT&T deal of $150 million, GE-Genpact ($500 million), Mitsui-Vedanta ($981 million), Sanofi Aventis-Shantha Biotech ($770 million), etc.
The tax dispute between Vodafone and the Central Board of Direct Taxes (CBDT) arose because the London-based company bought 67 per cent equity of Hong Kong-based Hutchison through companies based in the Netherlands and Cayman Islands in Indian company Hutchison Essar (now known as Vodfone India) for a consideration of $11.2 billion in May 2007. Vodafone's argument was the deal happened outside India and the CBDT viewed it as buying of Indian assets.
The petition is now listed for hearing on February 27.