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Vodafone contests claims of tax demand

Under attack from IT department, Vodafone today contested the claims of Rs 11,218 crore tax demand saying the company was not liable for any tax on the transaction relating to its acquisition of Hutchisons' stake in Hutchison Essar telecom joint venture in India in 2007.

business Updated: Oct 22, 2010 19:44 IST

Under attack from IT department, Vodafone on Friday contested the claims of Rs 11,218 crore tax demand saying the company was not liable for any tax on the transaction relating to its acquisition of Hutchisons' stake in Hutchison Essar telecom joint venture in India in 2007.

"Vodafone strongly disagrees with the tax calculation released by the Indian Tax Office... It continues to believe that it is not liable for any tax on this transaction involving the transfer of a company outside of India," a Vodafone spokesperson said in a statement.

Further, the telco added that it will continue to take whatever actions necessary to defend itself in this matter.

The case relates to Vodafone Group's acquisition of majority stake of Hutchison in Hutchison Essar telecom joint venture in India in 2007 for $11 billion (about Rs 55,000 crore).

The reaction comes in the wake of the government today asking Vodafone to pay Rs 11,218 crore in taxes within a month for the acquisition of Hutchison's stake in the telecom joint venture in India in 2007.

"The IT department today issued an order raising a tax demand of Rs 11,217.95 crore on Vodafone International holdings BV treating it as an assessee in default... for failure to deduct tax as required before making a payment of $ 11,076 million (about Rs 55,000 crore) to Hutchison Telecommunication International Ltd," an official statement said here.

The notice was issued following the Supreme Court directive on September 27 to the IT assessing officer to determine and quantify the tax liability of Vodafone within four weeks.

Reacting to it Vodafone said, it was the acquirer and not the vendor and has made no gain on the transaction.

The spokesperson added that "in this test case, the tax authority is attempting to interpret Indian law as it has never been interpreted for the past 50 years, and this interpretation also goes against internationally recognized tax norms".

This calculation, as well as any appropriate stay of payment, will be reviewed when the matter comes before The Supreme Court on October 25, 2010.