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HindustanTimes Wed,01 Oct 2014

Vodafone facing tax liability of over Rs. 27,000 cr in India

PTI   June 08, 2014
First Published: 15:47 IST(8/6/2014) | Last Updated: 15:50 IST(8/6/2014)

UK-based telecom major Vodafone is facing tax claims and interest totalling more than Rs. 27,000 crore in India, which includes Rs. 14,200 crore for acquiring Hutchinson's stake in 2007, the company said in its annual report.

Vodafone said that its Indian subsidiary had received a letter in January last year from the authorities reminding it of the tax demand of Rs. 14,200 crore in relation to the dispute over acquisition of Hutchinson in 2007.

The report said, "Vodafone International Holdings BV (VIHBV) has not received any formal demand for taxation following the Finance Act 2012 but it did receive a letter on January 3, 2013 reminding it of the tax demand raised prior to the Indian Supreme Court's judgement and purporting to update the interest element of that demand in a total amount of Rs. 142 billion."

Besides, the UK telecom company is also facing tax liability of over 1 billion pounds. These claims are related to transfer pricing, disallowance of income tax holidays and applicability of value-added tax to SIM cards.

According to the report, "Vodafone India (VIL) and Vodafone India Services Private Limited (VISPL) are involved in a number of tax cases with total claims exceeding 1 billion pound plus interest, and penalties of up to 300% of the principal."

At current exchange rates, one billion pounds is worth Rs. 9,900 crore.

The claims against VIL range from disputes concerning transfer pricing and the applicability of value-added tax to SIM cards, to the disallowance of income tax holidays. The quantum of the tax claims against VIL is in the region of 900 million pounds.

VISPL has been assessed to owe tax of approximately 240 million pound plus interest of 190 million pounds (about Rs. 4,250 crore) in respect of a transfer pricing margin charged for the international call centre of Hutchison prior to the transaction with Vodafone, sale of the international call centre by VISPL to Hutchison and alleged transfer of options held by VISPL for VIL equity shares.

As regards the liability of Rs. 14,200 crore towards acquisition of Hutchison Whampoa in 2007, the company faces tax demand following the retrospective tax amendment carried out by the UPA government in 2012.


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