British High Commissioner to India Richard Stagg today said telecom operator Vodafone should not be made pay the proposed Rs 11,000 crore tax from its deal with Hutchinson Essar as it had not made any "capital gains".
"We believe that Vodafone have not made capital gain, which would attract the proposed tax. But these issues are lying in the Indian Supreme Court, we respect the court of land... But we have an opinion," Stagg told reporters here.
In 2007, Vodafone, through its group firm Vodafone International Holdings, had bought Hutchison India's 67 per cent stake in Hutchison Essar joint venture for about $11 billion (Rs 55,000 crore).
The tax authorities claim that the deal attracts a tax of over Rs 11,000 crore, even though the deal was done by two MNCs outside the country.
The I-T department fixed tax liability of Rs 11,217.95 crore on Vodafone International Holdings BV, treating it as an assessee in default for its failure to deduct tax at source, as required, before making a payment of $11,076 million (about Rs 55,000 crore) to HTIL. Following the stake transfer in 2007, Hutchison Essar was renamed Vodafone Essar.
In November last year, the Supreme Court had directed Vodafone, which is contesting the tax demand to deposit Rs 2,500 crore, along with a bank guarantee of Rs 8,500 crore, before it within eight weeks for adjudication of its suit.