- In reply to the merger proposal between the Vodafone India – Idea cellular, IT authorities have issued a Non-objection Certificate (NOC).
- However, the NOC is given along with a caution remark about the outstanding tax liabilities of Rs 22,100 crore on Vodafone parent group.
- A merger requires requires an NOC from the tax department. Therefore, since the outstanding liabilities were on the parent and the pre-merged entity (as Vodafone group), the same liabilities would go to the merged or combined entity.
- Let’s know about the history in brief;
- ‘Hutchison (HK)’ was a Non resident having no tax implications in India. ‘(CGP Investments Holding Ltd) CaymanIsland (Mauritius)’ was a 100 % Subsidiary of Hutchison (HK). Hutchison Essar was an Indian co. in which CGP Cayman Island(Mauritius) was holding 67% shares .
- Since ,Mauritius is considered as a tax Heaven Country, So that, CGP was incorporated for this transaction exclusively. Vodafone is a co. incorporated in Nederland (UK) & foreign co. in India.
- Hutchison (HK) has sold CGP-Cayman Island to Vodafone (UK) @ $ 10 billion in 2007 and Vodafone has paid entire sum to Hutchison (HK) without deducting any TDS.
- As per Indian tax law, this transaction was not taxable in India, because Buyer and seller both were Non resident of India, thus, In Supreme court vodafone won the case.
- Subsequntly, parliament amended the law retrospectively to tax such transaction , and raised demand on Vodafone International Holdings for failing to deduct tax (TDS) on capital gains.
- The matter is currently pending before international arbitration tribunal & will begin trial in February 2018 on Vodafone’s challenge to India using a retrospective legislation to seek Rs 22,100 crore in taxes.
