HC reserves ruling on Vodafone-IT dispute for next week

10 July 2008

Mumbai: The Bombay High Court has reserved its order on a disputed $2 billion capital gains claim by the income tax department, arising from telecom major Vodafone's acquisition of Hutchisson-Essar in 2006.

A division bench comprising Justices S Radhakrishnan and Anand Nirgude also asked Vodafone and the income tax department to submit their written arguments in the matter within one week.

Vodafone had approached the court soon after the I-T department issued it a show-cause notice.

Vodafone is contesting the tax claim saying the transfer of shares between two foreign companies was not taxable in India.

A subsidiary of Vodafone Group, Vodafone International (a Dutch company) picked up Hutchisson's (based in Cayman Islands) 66 per cent stake in Hutchisson-Essar to form the Vodafone-Essar in India in $11.2 billion deal in 2006.

Vodafone International had bought out a Cayman Islands company called CGP investments, which was owned by Hutchison. CGP owned 52 per cent stake in Hutchison Essar, the Indian telecom company, through several Mauritius entities.

The department had issued a show-cause notice to Vodafone Essar asking 'why it should not be treated as an agent of Hutchison International'.