The Supreme Court has asked the Income-Tax Department not to enforce any penalty order against Vodafone International Holdings BV till further orders by it in the tax dispute.
On Friday, the apex court directed Vodafone to appear before the I-T Department to file its representation on the penalty issue. The court also asked the I-T Department to dispose of the matter in accordance with law, adding, however, that no order of penalty should be imposed on Vodafone till further orders by the apex court.
The I-T Department had issued a notice to Vodafone on March 23 initiating penalty proceedings against the company. This is because the company had allegedly failed to deduct tax at source before making payments to Hutchison Telecommunications International Ltd (HTIL) as part of its $11.2-billion acquisition of the Indian telecom assets of HTIL in 2007.
Vodafone had moved the apex court to block the Department's penal action on the contested $2.5-billion tax bill relating to its 2007 acquisition. Vodafone's plea against the tax notice itself is still pending before the apex court. If tax liability is established, Section 271C of the Income-Tax Act calls for penalty of up to 100 per cent of the amount of tax that was not deducted at source.
“All the advice received by Vodafone during and since the acquisition is that there is no tax or therefore penalty that arises…,” Vodafone said in a statement. Vodafone spokesperson, Mr Simon Gordon, had told Business Line that the company has approached the apex court since the court had recently asked the I-T Department to refrain from taking further steps on the case until its next hearing, scheduled for July 19.