Vodafone has filed a petition in the Supreme Court against a notice received from the Indian tax authorities initiating penalty proceedings against it. This notice has been issued in respect of the current withholding tax case relating to the Hutchison transaction in 2007, which is currently in front of the Supreme Court.
In its statement, Vodafone said that the notice shows unpredictable nature of the tax policy and it is difficult to understand the rationale behind the tax authorities seeking to impose penalties on a matter which the tax authorities have, themselves, described as a “test case”.
According to Vodafone, seeking penalties on a “test case” involving a major infrastructure investor highlights the unpredictable nature of India’s taxation policy. This move is only likely to raise further concerns amongst potential investors into India.
The statement said that established tax laws are being reinterpreted in a completely new way and there are no previous examples of such taxes being imposed in India on an overseas share transfer such as this. Indian law precludes the tax authorities from imposing penalties in cases where the assessee has acted on reasonable legal advice in view of past tax precedent in India or the issue of imposition of tax is being decided for the first time by courts of law in India.
Vodafone further clarifies that the position being taken by the tax authorities is both unprecedented, and also out of step with international taxation principles governing acquisitions, which are designed to encourage investment
DEEPAK KUMAR
PGDM
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