SC quashes the tax demand on Vodafone, setting precedent

January 21, 2012 17:19
SC quashes the tax demand on Vodafone, setting precedent

The phenomenal verdict by the apex court is definitely going to do great maneuver to the country’s image and of course the Vodafone in particular shall benefit largely.

The Supreme Court on Friday decided one of the biggest tax dispute cases in the history of the corporate world by pronouncing its judgment on Vodafone's appeal challenging a Bombay High Court order validating nearly $2 billion capital gains tax on its $11 billion acquisition of Indian mobile telephone service provider Hutchinson Telecommunication International Ltd (HTIL). The verdict quashed the Income tax demand on Vodafone, pertaining to its buying stakes in the latter in 2007.  As per the verdict, Indian Authorities had a shot in their arm when it was proclaimed that, they have no say in the issue as the deal was in between two foreign entities.

The verdict delivered by a three-judge bench may reinstate the faith of the foreign investors about the country's investment climate. However, it has come as a setback to the government, which expected to earn more than $2 billion in taxes from the British telecommunications company. It would also mean that similar overseas investments may remain out of the federal government's tax net.

Just Updated: Little perturbed with the decision, Central Board of Direct Taxes (CBDT) on Saturday said it has constituted a "core" panel to study the landmark Supreme Court verdict clearing Vodafone Group PLC (VOD.LN) of any tax liabilities on the deal it struck to enter the Indian telecommunication sector in 2007. "The committee will study the 275-page order of the Supreme Court and suggest a strategy for the future," the body spokeswoman told Dow Jones Newswires.

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