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Confusion still prevails over the status of the Rs 2,500-crore deposit money that the Income Tax (I-T) Department has refunded Vodafone.
According to the Supreme Court Web site, the same Bench (comprising the Chief Justice Mr S.H. Kapadia, Mr Justice Swatanter Kumar and Mr Justice K S Radhakrishnan) — which delivered the landmark verdict in the Vodafone tax case and then on Tuesday dismissed the Centre's review petition challenging its order — is slated to hear on Friday an application by the I-T Department.
The application seeks a three-month extension of the refund deadline in the light of the proposed amendments in the Union Budget 2012-13 to tax Vodafone-Hutch type deals, according to sources in the Government's legal team.
Here is what has led to the present situation.
On November 15, 2010, the Supreme Court had asked Vodafone to deposit around Rs 2,500 crore with the court's Registry within three weeks along with a bank guarantee for around Rs 8,500 crore within eight weeks. (The I-T Department had raised a demand of over Rs 11,000 crore on Vodafone's $11.2-billion indirect acquisition of Hutchison's Indian telecom assets in 2007.)
Submit undertaking
The apex court had then given the I-T Department the liberty to withdraw the deposit amount, but directed it to submit an undertaking that it will refund the deposit to Vodafone with interest if the case went in favour of the company.
In its January 20, 2012 order (which ruled that Vodafone is not liable to be taxed on the deal), the apex court had directed the I-T Department to return within two months the Rs 2,500 crore with 4 per cent annual interest calculated from the date that the Department withdrew it from the Registry till the date of payment.
This two-month deadline had expired on March 20.
Plea to extend deadline
The court had also asked its Registry to return the bank guarantee amount to Vodafone within four weeks from January 20.
Anticipating certain amendments to the Income Tax Act to be proposed in the Union Budget 2012-13, the I-T Department had quietly moved an application early February before the Supreme Court seeking a three-month extension of the deadline for the refund of the deposit amount to Vodafone, the sources said.
To reverse the effect of the apex court ruling in the matter, the Budget proposed amendments to the Income-Tax Act (and that too retrospectively from April 1962) to bring the Vodafone-Hutch type deals into the tax net.
The Government hopes to ensure that the amendments are enacted soon and then raise a tax amount of around Rs 40,000 crore from several such deals where there is an indirect transfer of shares overseas, but with the underlying assets in India.
The sources confirmed that the Department has refunded the deposit to Vodafone after Tuesday's order. In the light of this development, the application may become infructuous, they added. However, the fact that the matter is still listed on the Supreme Court Web site and the proposed Budgetary amendments have given rise to speculation over the status of the refund amount.
Though there were reports of the Government planning to exercise its last option of filing a curative petition in the matter (after the dismissal of review petition), the Law Minister, Mr Salman Khurshid, on Tuesday denied any such move.
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