The Bombay High Court (HC) has accepted a writ petition filed by Vodafone International Holdings BV, challenging Income-Tax (I-T) department's show-cause notice on the capital gains tax issue. The court also said that it will hear the tax issue "continuously during the week" beginning March 10, 2008.
Vodafone had earlier filed a petition challenging the jurisdiction of I-T department to issue a notice to the company for recovering of withholding tax. I-T department had earlier asked the British telecom major to pay withholding tax of around $2 billion.
The matter was heard by the high court on January 28.
Vodafone had argued that it did not have withholding tax obligations in India and that the transaction – acquisition of a Hong Kong-based Hutchison Telecommunications International Ltd's (HTIL) stake in Indian GSM operator Hutch-Essar - was not taxable in India.
Further, the court also continued the earlier stay granted to Vodafone.
Meanwhile, HC said that it would hear the Vodafone tax issue continuously from March 10, 2008.
This is after the counsels for Vodafone and the Income Tax (I-T) department assured the Bombay HC that they would complete the procedures within 10 working hours.
On its part, the I-T department informed the court that the companies – HTIL and Vodafone - have not filed the original agreement (the Memorandum of Understanding between) with the Foreign Investment Promotion Board (FIPB). The department also said that it was yet to get a copy of the original agreement.
Earlier, the I-T department had issued a show-cause notice to Vodafone-Essar, asking why capital gains tax on the $11.1 billion deal should not be levied on Vodafone.
Vodafone-Essar, on its part, filed a writ petition in the Bombay High Court challenging the right of the tax authorities to levy a capital gains tax. The UK-based company had also maintained that tax should be paid by the seller and not by the buyer, in turn, putting the onus on HTIL.
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