The Supreme Court of India on Friday set aside a Bombay High Court judgement asking Vodafone International Holding to pay income tax of $2.18 billion on an overseas deal between Vodafone and Hutchison Essar, news agencies reported.
The apex court, in its order directed the IT department to return $497 million which the UK-based company had deposited in the court in compliance of its interim order.
“The Department is hereby directed to return the sum of Rs. 2500 crores, which came to be deposited by the appellant in terms of our interim order, with interest at the rate of 4% per annum within two months from today. The interest shall be calculated from the date of withdrawal by the Department from the Registry of the Supreme Court up to the date of payment,” the court order stated.
Vodafone had appealed to the Supreme Court after it lost the case in the Bombay High Court in 2010. The case pertains to Vodafone’s $11 billion deal to buy Hutchison Whampoa Ltd’s Indian mobile business in 2007, the Press Trust of India reported.
The apex court ruled that the Indian government had no jurisdiction over Vodafone’s deal of buying mobile assets in India as the transaction took place in Cayman Islands.
“Applying the look at test in order to ascertain the true nature and character of the transaction, we hold, that the Offshore Transaction herein is a bonafide structured FDI investment into India which fell outside India’s territorial tax jurisdiction, hence not taxable,” the court order stated.
“The said Offshore Transaction evidences participative investment and not a sham or tax avoidant preordained transaction. The said Offshore Transaction was between HTIL (a Cayman Islands company) and VIH (a company incorporated in Netherlands). The subject matter of the Transaction was the transfer of the CGP (a company incorporated in Cayman Islands). Consequently, the Indian Tax Authority had no territorial tax jurisdiction to tax the said Offshore Transaction,” the order further stated.
Vodafone hailed the judgement and said in a statement that it underpins the company’s confidence in India.
“We welcome the Supreme Court’s decision, which underpins our confidence in India. We will continue to grow our Indian business – including making significant investments in rural areas and in 3G network coverage – for the benefit of Indian consumers,” Vodafone CEO Vittorio Colao said in a statement.
Vodafone has maintained consistently throughout the legal proceedings that this transaction was not taxable and we are pleased with today’s judgement in the Supreme Court, the company further stated.
Click here to read the Supreme Court judgement in Vodafone case…
