July 07 2020
Voda's London HQ rejoices after ruling
20 January 2012

NEW DELHI/LONDON: The Supreme Court judgment, rejecting I-T department's claim of Rs 11,000 crore from Vodafone triggered celebrations at its London headquarters. 

"We are a committed longterm investor in India and we have made clear all along that we have faith in the Indian judicial system. We welcome the Supreme Court's decision which underpins our confidence in India," Vodafone CEO Vittorio Colao said. "We will continue to grow our Indian business - including making significant investments in rural areas and in 3G network coverage," he added. 

The transaction involved HTIL, a company incorporated in Cayman Islands, and Vodafone fromthe Netherlands. "The subject matter of the transaction was the transfer of CGP (a company incorporated in Cayman Islands). Consequently, the Indian tax authority had no territorial jurisdiction to tax the said offshore transaction," the court said.


Through the transaction, Vodafone acquired a 67% stake in the Indian operations of Hutch Essar. In courtroom, the team of lawyers that assisted senior advocate Harish Salve during his marathon 17-day argument were jubilant. The CJI authored the judgment for himself and Justice Kumar, while Justice Radhakrishnan, in a separate judgment, concurred with him. 

The verdict is unambiguous and leaves no maneuvre space for the I-T department. "Shareholding in companies incorporated outside India (CGP) is property located outside India. Where such shares become subject matter of offshore transfer between two non-residents, there is no liability of capital gains tax," the court said. 

Commenting on role of tax policy in the economy, the court said it was crucial for foreign investors as it helps in making rational economic choices. "It is for the government of the day to have them incorporated in the treaties and in the laws so as to avoid conflicting views. Investors should know where they stand," it said. 

"It also helps the tax administration in enforcing provisions of the taxing laws. FDI flows towards locations with strong infrastructure which includes enactment of laws and how well the legal system works. Certainty is integral to (the) rule of law. Certainty and stability form the basic foundation of any fiscal system," the court said.  









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