SC dismissed Centres plea over Vodafone tax-jurisdiction review

The Supreme Court of India Tuesday dismissed the government's plea of reviewing SC's judgement regarding Vodafone-Hutch tax case of Rs.11,000-crore, which the apex court has judged in the favour of world's biggest telecom player Vodafone Inc. in this January.

The Income Tax Department of India had filled this case seeking a review of SC's verdict on an overseas deal between Vodafone International Holdings and Hutchison Group. The Centre has reportedly filled this case on the basis of amendment in the Income Tax Act in which Finance Minister Pranab Mukherjee has proposed to levy capital gains tax on domestic asset acquisition through merger and acquisition deals involving foreign companies.

Dismissing the Centre's plea, a bench of three judges comprising Chief Justice S H Kapadia, Justice K S Radhakrishnan and Justice Swatanter Kumar said that the deal was held in outside India's territorial tax jurisdiction.

Moreover, the apex court has also asked the I-T department to return Rs. 2,500 crore deposited by Vodafone, in compliance of its earlier interim order, within two months along with four per cent interest from the date of withdrawal of money by the tax department.

The court also asked the Supreme Court registry to return within four weeks the bank guarantee of Rs 8,500 crore given by the telecom major.

Earlier, in January Vodafone had won it's five-year legal battle over the acquiring Indian mobile business Hutchison Whampoa Ltd in worth US$11 billion in 2007. The I-T department had asked US$2.2-billion tax.

Vodafone had argued that the Indian authorities had no right to tax the transaction between two foreign entities. Even if tax was due, it should be paid by the seller and not the buyer.