Nothing wrong in using tax avoidance routes: Vodafone

Telecom major Vodafone on Tuesday told the Supreme Court that it did not find anything illegal in using the tax avoidance routes. Senior advocate Mr Harish Salve, representing Vodafone, was defending the tax haven route used in the Vodafone-Hutch deal.

The apex court is hearing an appeal by Vodafone challenging a $2.6-billion demand by the I-T Department on its $11-billion acquisition of Hutchison's Indian telecom assets. Mr Salve reiterated the distinction between tax evasion and tax avoidance, and insisted that the latter was permissible under law. Mr Salve said there was nothing illegal about the Vodafone-Hutch deal.

He said while the I-T Act covers the transfer of a capital asset situated in India for taxation, in the case of the Vodafone-Hutch deal, Vodafone acquired the capital asset of Hutch located overseas and even the deal was done outside India. Therefore, the deal was not liable to be taxed in India.

Mr Salve cited two foreign cases – from Italy and Australia – to support his argument that overseas transaction by the foreign firms, like in the Vodafone-Hutch deal, cannot be taxed by the I-T Department in India.

“If there was a direct deal with the HTIL (Hutchison Telecom India Ltd), then there could be a tax liability,” he said.

He said that if at all the deal had to be taxed, Parliament should have amended the existing I-T Act before the Vodafone-Hutchison transaction to include an express provision to bring such a deal – that takes place abroad between two foreign companies – into the tax ambit citing the underlying economic interest in India.

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