The Income Tax department today issued a showcause notice to telecom firm Vodafone International Holdings over non-payment of tax at source towards $11.2 billion it paid to buy Hutchison's operation in India in 2007.
The fresh notice comes after the Supreme Court dismissed the company's application questioning the tax department's jurisdiction over a Dutch company.
The tax department asked Vodafone to showcause as to why action should not be taken against it for the "default of non-deduction of tax at source from the payment of $11.2 billion made on May 8, 2007 to Hutchison Telecommunications International for transfer of interest in the Indian company Hutch-Essar," an official release said.
The company has to issue a reply by November 16.
Stating that the reply would be filed in due course, a Vodafone spokesperson said: "Vodafone is confident that no tax is payable on this transaction and all of the taxation and legal advice received remains consistent with this view."
In 2007, Vodafone acquired majority stake held by Hutch Telecommunications International (HTIL) in Hutch-Essar (now Vodafone Essar) for around $11.2 billion.
After regulatory clearances were given, the tax department issued a showcause notice to Vodafone under section 201 of the I-T Act saying the company did not deduct tax, estimated at around $2 billion, in the payment it made to HTIL. The government decided to treat Vodafone as an agent of Hutch, a non-resident, under section 163 of the Act to recover tax dues.
Vodafone had challenged the I-T department's jurisdiction to issue the notice saying it is a Dutch company (registered in Netherlands) and Hutchison is incorporated in the Cayman Islands.
On 23rd January 2009, the apex court dismissed Vodafone's appeal with the direction that they should subject themselves to the jurisdiction of the assessing officer with the liberty to "question the decision of the authority on the preliminary issue before the High Court, in the event the same is decided against it".
On its part the tax department said, the company whose shares were sold, had operations in India and that it was an asset in India.
