Vodafone case law study

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Vodafone case law study

March 02, July 23, The truth is that the demand made by the Income Tax Department was wholly unsustainable. If the Vodafone case had a tax implication of just Rs. But the law does not change Vodafone case law study the tax demand is of a large amount.

Shares and assets The demand for tax in the Vodafone case was a result of failing to understand the difference between the sale of shares in a company and the sale of assets of that company. It is an elementary principle of company law that ownership of shares in a company does not mean ownership of the assets of the company.

The assets belong to that company which is a separate legal entity. In the Vodafone case, 51 per cent of Hutchison Essar Ltd.

HEL was directly owned by the Hutchison group of Hong Kong through a multiple layer of companies and ultimately by a company incorporated in the Cayman Islands.

This was not the result of any devious tax planning scheme but the consequences of the growth of Hutchison Essar Ltd. Hutchison International decided to exit its Indian operations and a public announcement was made to this effect. Consequently, by purchasing one share of the Cayman Island company, Vodafone came to own 51 per cent of share capital of HEL.

The transfer of shares of one non-resident company Hutchison to another non-resident company Vodafone did not result in the transfer of any asset of HEL in India.

All the telecom licences and assets continued to belong to HEL or its subsidiaries. The absurdity of the demand in the Vodafone case can be explained by two simple illustrations.

Vodafone case law study

Hyundai Motors India Ltd. The Indian subsidiary has a large factory near Chennai and perhaps owns several other assets. If, for example, Samsung purchases 65 per cent of the share capital of the parent Korean company in Seoul can it be argued that Samsung has automatically purchased 67 per cent of the factory at Chennai?

Consequently, can it be said that the sale of shares in Korea resulted in a capital gain in India which requires Samsung to deduct tax at source under the Indian Income Tax Act, ? Under Section 9 1 i of our Act, there is liability to tax only if there is a transfer of a capital asset in India.

In this illustration, the capital asset that is transferred was the share in Korea and there is no transfer of assets in India. The Indian subsidiary continues to exist and continues to own the factory as well as other assets.

The absurdity can also be seen by a domestic illustration. If another Indian group purchases 67 per cent of the shares of Tata Motors Ltd.

Vodafone Tax case - A Case Study for Investments in India - Madhu S - MindTEXT

Can any one say that there is a corresponding transfer of 67 per cent of its factory, lands and buildings at Pune and Jamshedpur as well? Can the local stamp authorities in Jharkhand and Maharastra demand stamp duty on the ground that there is also a transfer of underlying assets?

It is elementary that what has been sold is only 67 per cent of the paid-up share capital of Tata Motors Ltd. The assets of that company remain with that company and do not get transferred.

The shares owned by Hutchison were sold to Vodafone indirectly purchasing 51 per cent of the share capital of Hutchison Essar Ltd. Not a single asset of this Mumbai based company was transferred either in India or abroad. Indeed, there would be no transfer of any asset in India. This is also exactly how several international transactions are concluded.

Vodafone wins transfer pricing tax dispute case - The Hindu

Vodafone was not the first case where transfer of shares between non-resident overseas company resulted in a change in control of an Indian company. But controlling interest is not a capital asset; it is the consequence of the transfer of shares.Vodafone Group won another big tax battle in India as a local court ruled Thursday that it didn’t owe potentially hundreds of millions of dollars in back taxes.

Introduction of Case – Vodafone India Services (P) Ltd. Is a wholly owned subsidiary of Vodafone Tele-Services (India) Holdings Ltd., a non resident company Mauritian entity.

Vodafone Holding is AE (Associate Enterprise) of Vodafone India for the purpose of transfer pricing provisions under. What is the Vodafone tax evasion case all about? Update Cancel. ad by Zoho. Present Mumbai High Court Judgment in Vodafone case It is one of the illogical orders of the Income Tax Department, in which A.O & other authorities have not read the tax law, not given any thought about the law and passed an order as i the department makes law.

of law by taking” Vodafone’s written judicial opinion at face value.2 The paper seeks to discern the ‘real law’ arising from the Vodafone case which is more context-sensitive and pragmatic.

2 More simply, the paper perceives this case as an effective context to analyse the predicament of. Mar 01,  · The demand for tax in the Vodafone case was a result of failing to understand the difference between the sale of shares in a company and the sale of assets of that company.

It is an elementary Author: Arvind P. Datar. Oct 08,  · In a major relief to British telecom major Vodafone in the transfer pricing case, the Bombay High Court on Thursday ruled in its favour, setting aside Author: Lalatendu Mishra.

Vodafone Tax case - A Case Study for Investments in India - Civitas