New Delhi: Telecommunication major Vodafone Group Plc's Indian unit's non executive Chairman Analjit Singh met the Finance Secretary R S Gujral on Thursday to discuss the issue of Rs 112-billion ($2.2 billion) tax over the company's $11-billion purchase of Hutchison group's Indian operations amid widespread controversy over whether the company is liable to pay the tax.
Singh -- a minority shareholder in Vodafone India and executive Chairman of diversified Max India Ltd -- discussed tax-related issues with Gujral and informed him that Vodafone was not advised by the government to withhold tax before the transaction concluded and payment was made," the Press Trust of India reported, citing an unnamed Financial Ministry official.
Recently, Gujral told the Business Standard that British major Vodafone Group Plc did not deduct withholding tax despite the ministry's notification sent before making the final payment to Hong Kong-based Hutchison Whampoa Ltd in 2007.
"The payer as well as payee (Hutch) can make application to the Assessing Officer under section 195(2) and 197 of Income Tax Act 1961 for dealing the exact tax liability resulting from above mentioned (acquisition) transaction," media reports quoted a letter sent by Income-Tax Department on March 23, 2007 to Indian company Hutchison Essar, which it acknowledged to have shared with Vodafone.
Earlier last month, the Finance Bill, tabled in the Parliament along with other proposals for the Union Budget 2012-13, had introduced a clarification in tax rules to bring under the tax net all cross-border mergers and acquisition deals involving Indian assets or businesses, with effect from 1962 when the rules were written.
The change in rules, coupled with a clause overruling adverse judicial decisions, will likely bring Vodafone under the tax net despite the Supreme Court ruling in favor of the telecom major, saying Vodafone is not liable to pay Rs 112 billion ($2.2 billion) in taxes.