India Court Defers Vodafone Tax Case Hearing To July 27
06/18/2012| 04:07am US/Eastern
By Kenan Machado
MUMBAI--The Bombay High Court Monday deferred until July 27 its hearing of an appeal by Vodafone Group PLC (>> Vodafone Group plc) against a move by Indian authorities to get the company to pay taxes on its 2007 deal to enter the country.
The court was to hear Monday a case filed by Vodafone International Holdings BV, a Dutch unit of Vodafone, in October 2010 against a move by India's tax department to open a second front in the tax battle against the British company over its purchase of a local telecommunication venture.
Vodafone International had in 2007 bought a stake of about 67% in the Indian operations of Hutchison Whampoa Ltd. for $11.2 billion. The mobile-phone company, now named Vodafone India Ltd., is the country's third-largest by user numbers.
Indian authorities had sought to penalize Vodafone for its alleged failure to deduct tax on behalf of the government from its payment to Hutchison. Vodafone successfully challenged the move in January, when India's Supreme Court agreed with the company's argument that it didn't have to deduct taxes because the deal was between two foreign companies--the Dutch unit of Vodafone and a Cayman Islands-registered unit of Hutchison.
The latest case, which is now pending with the Bombay High Court, involves a different approach by local tax authorities in the Vodafone tax case. They are seeking to treat Vodafone International as an agent of Hutchison Whampoa--making the Dutch unit liable to pay tax on the Hong Kong-based company's income from the deal.
Vodafone wasn't immediately available for comment.
Vodafone is likely to be served a reminder to pay taxes and interest of around 200 billion rupees ($3.5 billion) on its 2007 deal once there's an official notification of a controversial law that allows local authorities to retroactively tax mergers in which an Indian asset is transferred, a senior government official told reporters in New Delhi in May.
The law designed to tax deals similar to the structure Vodafone adopted while buying Hutchison's India venture is widely seen as an attempt by India to elbow past the Supreme Court ruling in the case.
Write to Kenan Machado at email@example.com