India's top court to hear Vodafone tax appeal next month

25th October 2010, Comments 0 comments

India's top court said Monday it would hear next month an appeal by Vodafone against a multi-billion-dollar tax bill stemming from the British mobile giant's purchase of an Indian firm.

The decision by the Supreme Court to defer the hearing until November 15 came after tax officials on Friday slapped Vodafone with a 2.53-billion-dollar bill -- including interest -- and told it to pay in 30 days.

The tax demand stems from Vodafone Group's 2007 purchase of a majority stake in Indian cellular phone company Hutchison Essar.

India's tax department is demanding the money from Vodafone, saying it failed to withhold tax while paying 11.1 billion dollars to buy Hong Kong-based Hutchison Whampoa's 67 percent stake in Hutchison Essar.

The long-running dispute is seen as a test case as Vodafone argues against a lower court ruling asserting that India has tax jurisdiction in cross-border transactions.

The battle is being closely watched by international investors with experts saying the case could have implications for big-ticket purchases of Indian firms by other foreign companies.

Vodafone maintains Indian law does not require it to deduct tax because the deal took place in the Cayman Islands and both buyer and seller were foreign.

"Further, Vodafone was the acquirer and not the vendor and has made no gain on the transaction," the Vodafone spokesman said.

The Bombay High Court ruled in September that local authorities have the right to seek tax.

Last week, Vodafone chief executive Vittorio Colao said the outcome of the dispute could be a key factor in determining the company's future investments in India.

Colao also said it was "very important to have an outcome here that establishes a principle for the future. This is a concern for our investors and for other international investors."

Indian authorities are also scrutinising tax aspects of other international deals.

SABMiller, the world's second-biggest brewer, has a tax case pending over its 120-billion-dollar acquisition in 2006 of the Indian arm of Foster's from the Australian drinks group.

© 2010 AFP

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