Vodafone in a legal battle over £1bn tax bill
June 23, 2008
A hearing in the Mumbai High Court set to last five days has started. The legal battle is to decide whether Vodafone has to pay the Indian tax authorities $2bn for its $11.2bn takeover of one of Indians major mobile phone networks.
Vodafone bought a controlling share in Hutchinson Essar from the Hong Kong based Hutchinson in May last year. Advisors to Vodafone confirmed at the time that because the deal was between two foreign companies no tax was owed to the Indian authorities. However the Indian government disagrees.
The hearing that will take place this week, will decide the validity of Vodafones writ seeking an injunction against the Indian tax authorities investigation of the deal. A decision is not expected for a few weeks. Whatever the decision is, it is thought the losing side will make an appeal with the High Court in Delhi.
The case is of interest to all foreign companies interested in Indian assets. The basis of Vodafones writ is that they cannot owe tax because the shares were transferred between a Dutch group owned by Vodafone and a company registered in the Cayman Islands to Hutchinson. Both are outside India’s jurisdiction. The Indian government however says that it does have a capital gains claim because the assets are based in India.
Vodafone remain confident that they have a valid case. “Vodafone continues to believe and has been advised that there is no tax a payable on the transaction,” a spokesman for Vodafone has said.
India has a fast growing economy and has become a very good prospect for multi-nationals. This case could be influential to those companies wanting to invest in India.
See www.vodafone.com for more information on the company.
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