Vodafone case: Apex court throws out Govt's review plea

Arun S New Delhi | Updated on March 12, 2018 Published on March 20, 2012

The Supreme Court today dismissed the Centre’s review petition in the Vodafone tax case.

The Supreme Court on Tuesday dismissed the Centre’s review petition challenging its landmark order in the Vodafone tax case.

The review petition was taken up by the same Bench -- comprising the Chief Justice Mr S H Kapadia, Mr Justice Swatanter Kumar and Mr Justice K S Radhakrishnan – that had on January 20 held that Vodafone is not liable to be taxed on its $11.2-billion acquisition of Hutchison’s Indian telecom assets in 2007.

“We have carefully gone through the review petition filed by the Union of India on February 17, 2012. We find no merit in the review petition. The review petition is, accordingly, dismissed,” the Bench said.

The judges considered the review plea in the chamber this afternoon before rejecting it. The matter was taken up without the presence of lawyers from either side. Usually, most of review petitions are rejected at this stage itself and are not listed to be heard in the open court.

Later, Vodafone said in a statement that, “This once again emphasises the legality and bona fides of the transaction. The Supreme Court’s clear and unambiguous ruling today, based on the existing laws of India, re-iterates that the Indian tax authority does not have the jurisdiction to tax the transaction.”

“We look forward to the return of our deposit immediately,” the company added.

The apex court had in its order said that the offshore transaction between Hutchison Telecommunications International Ltd (a Cayman Islands company) and Vodafone International Holdings (a company incorporated in Netherlands) – regarding the transfer of shares of CGP (a company incorporated in Cayman Islands) -- was a bona fide structured Foreign Direct Investment into India which fell outside India’s territorial tax jurisdiction.

The Income Tax (I-T) Department had raised a demand of $2.6 billion (Rs 11,297 crore) on the deal. The Bombay High Court had ruled in the I-T Department’s favour. Vodafone then moved the Supreme Court against this order denying any tax liability.

After the Supreme Court order, the Centre filed the review plea claiming that the apex court failed to appreciate the consequences of its judgement on the steps taken by the Government to promote tax transparency and fight tax evasion.

The apex court also went wrong in stating that ‘the question involved in the case is of considerable public importance, especially on FDI’, the Government had said. It said the matter was not related to the Government’s FDI policy at all, adding that the Vodafone-Hutch transaction did not involve any inflow of FDI into India.

To reverse the effect of the apex court ruling in the matter, the Union Budget 2012-13 proposes 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 raise a tax amount of around Rs 40,000 crore from such deals where there is an indirect transfer of shares overseas, but with underlying assets in India.

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Published on March 20, 2012
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