With the Finance Minister, Pranab Mukherjee abandoning the idea of dropping the proposal that would amend the law to impose capital gains tax on merger and acquisitions that involve foreign companies having assets or shares in the country, a 13,000-crore demand by the I-T department now awaits Vodafone, reports Times of India. It further adds that on receiving an approval by the President to the Budget, a notice will be served to the company. According to the tax department, the notice is ready at the moment and is only awaiting the approval of the Budget by the President. It will include the interest on the 7,900 crore that is due from the transaction between Vodafone and Hutchison, wherein the former acquired the latter's 67 percent interest in the Indian telecom venture. The report adds, “While the move will come as a setback not just for Vodafone but nearly a dozen other companies, it may trigger a fresh round of litigation with the telecom giant threatening to invoke the provisions of the India-Netherlands investment treaty.”
Finance Minister Pranab Mukherjee was quoted by a Times of India report as saying, “There can't be a situation (where) somebody will make money on an asset located in India and will not pay tax either to India or to the country of its origin. We can't allow India to be a tax haven to attract foreign investment.” The report further added that officials from the I-T department are gearing up to recover taxes from Vodafone, and a tax notice, according to reports is imminent. Reportedly, even the Lok Sabha has passed the Finance Bill, which by the way of an amendment provisions for tax laws that pertain to capital gains on sale of assets located in the country by the way of indirect transfers overseas, thereby powering the I-T department to recover 11,218-crore as taxes from Vodafone.
The report adds that, “According to a senior tax official, the I-T department has described Vodafone as an 'agent' of Hutch to back up a fresh tax demand on capital gains in the deal. The department, which is weighing various options for levying tax, can also make a tax assessment on Hutchison.“
Publish date: May 9, 2012 4:54 pm| Modified date: December 18, 2013 10:13 pm