No tax liability on Hutchison deal, says Vodafone group

Maintaining that no tax liability arises from its $11 billion buyout deal with Hutchison in 2007, the UK based telecom major Vodafone today said it would continue to “vigorously” pursue the case in the Indian court.

“Vodafone Group’s position has not changed with regard to the tax case and we continue to believe that there is no tax to pay on this transaction...Vodafone will continue to defend its position vigorously and will look forward to the matter being reviewed in full by the Supreme Court on July 19,” Vodafone said in a statement.

It added that the company would continue to defend its position vigorously.

Vodafone said the $2 billion tax-demand by the Indian authorities was “contrary to international taxation principles”.

“The law is clear and India has not sought to tax such transactions before. To do so would be contrary to international taxation principles, which are specifically designed to encourage foreign investment and eliminate barriers to trade,” the Vodafone statement said.

In an interview to a private news channel NDTV, Vodafone India CEO, Mr Marten Pieters had hinted that the company may pay the tax to end the dispute with authorities.

“In the end we are businessmen, if there would be a good compromise we would probably, I guess, Vodafone group, would be willing to accept it,” Mr Pieters said.

He cautioned, however, that such a move would have a backlash on Indian companies doing similar mergers and acquisitions overseas, because “in retaliation, foreign governments may penalise them.”

The Income Tax department here has raised a demand of about $2 billion on Vodafone for buying majority stake of Hutchison in Hutchison—Essar in 2007 for over $11 billion.

The British company has challenged the decision and the issue is pending before the Supreme Court. It has already deposited some amount in the apex court.

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