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Mumbai, June 25 Telecom operator Vodafone said that the Income -tax laws in the country do not have “extra-territorial jurisdiction” and hence the company cannot be expected to pay capital gain taxes on payments made to Hutchison for acquiring controlling stake in Hutchison Essar.

Moreover, the company did not have any taxable presence in India at the point of entering into the deal with Hutchison.

The Income Tax Department and Vodafone are locked in a legal battle after Vodafone received a $2-billion bill from the former saying that the company was liable to pay capital gains tax as most of the assets it bought are based in India. Last year, Vodafone International had picked up controlling stake in Hutchison Essar for $10.9 billion

Mr Iqbal Chagla, Senior Counsel for Vodafone, said in the Bombay High Court that companies incorporated outside India could come under the purview of India law only if it is explicitly mentioned (in the law) in words. Vodafone International and Hutchison Essar- the two companies involved in the acquisition deal - are incorporated in the Netherlands and Cayman Islands, respectively.

It has also challenged the recent amendments to two sections of the Income Tax Act, Sec 191 and Sec 201, with retrospective effect, disputing its constitutionality. Vodafone has said Indian law at the time did not require it to withhold tax on the acquisition.

“Even if we assume the validity of the 2008 amendment to Section 201 of the Income Tax Act, it cannot be applied to Vodafone as the I-T law only covers companies incorporated in India,” said Mr Chagla.

This high profile case would continue till the next week.

More Stories on : Taxation | Telecommunications

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