The Hindu Business Line : HC ruling on Vodafone to enable I-T Dept to look at similar deals

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HC ruling on Vodafone to enable I-T Dept to look at similar deals

TDS amount in Vodafone case estimated at close to $2 billion.

Mr N.B. Singh

Our Bureau

New Delhi, Dec. 4 The Income-Tax Department estimates that tax deducted at source (TDS) amounting to about $ 2 billion had not been paid to the exchequer in the $ 11.2-billion Hutch-Essar deal.

The Bombay High Court decision to dismiss the writ petition of Vodafone International Holdings (VIH) has also strengthened the hands of the department to look at other offshore transactions/cases involving transfer of assets situated in India.

“The Bombay High Court move has definitely encouraged us and strengthened our hands in bringing to tax in India transactions involving transfer of assets situated here between entities located outside the country,” Mr N.B. Singh, Chairman, Central Board of Direct Taxes (CBDT), said here today.

Although the TDS amount involved has been pegged around $ 2 billion, official sources noted that the amount is subject to final computation by the department. Also, the notice issued does not put an exact number on the TDS amount that was not deducted and paid to the Government, they added. .

“We will be democratic….”, Mr Singh said when asked if the tax department would now pursue or open up assessments on other transactions that were undertaken offshore with Indian assets. He declined to name or put a number on the cases that would come under the department’s scanner after the Bombay High Court decision.

Meanwhile, Mr Singh also said that the CBDT has decided to file a caveat before the Supreme Court to ensure that no ex parte stay is granted on the Vodafone matter without hearing the tax department.

The Bombay High Court had on Wednesday dismissed the writ petition of VIH challenging the validity and legality of a notice issued by the I-T department on failure to deduct tax at source on payments made in respect of transfer of securities relating to Hutch-Essar Ltd (now Vodafone Essar Ltd)

Mr Prakash Chandra, Director General (International Taxation), said that the High Court decision would open the doors for the I-T Department to look into the entirety of Vodafone transactions and then decide whether they attract tax or not and also what nature of tax.

He highlighted that the law was very clear in the sense that once payment was made, tax had to be deducted at source. Mr Chandra pointed out that Vodafone had come through FIPB and as part of the clearances it was specified that it would be on its transactions subject to Indian laws, including those on TDS.

“Till now, the moment we issued notice seeking further information and details, the writ petition was filed by them. The department was restrained to proceed during the pendency of the writ petition. Once the writ petition has been dismissed, our right to look into the details of the case has strengthened. We want to see the agreements between the parties, the valuations made by them. All these had to be looked into before deciding how much taxes are to be paid”, Mr Chandra said.

He, however, said that the tax department would wait for eight weeks because the Bombay High Court had extended the earlier stay for this period. “Vodafone unfortunately had not filed the copies of the original agreement before us. We had asked them to do so. Unfortunately, they did not file it before the Honourable Bombay High Court. That was one of the reasons why the High Court imposed cost on them”, Mr Chandra said.