India: Supreme Court ruling in Vodafone

In February 2007, Hutchison Telecommunications International Limited, Cayman Islands (HTIL), sold 100 percent of its indirect holding in CGP Investments, Cayman Islands (CGP), to Vodafone International Holdings BV, Netherlands (Vodafone), for US$11.2 billion. The Indian tax authorities subsequently contended, inter alia, that the underlying asset transferred was a “controlling stake” in the Indian operating company Hutch Essar Limited (HEL), which was indirectly held by CGP. Accordingly, the tax authorities proceeded to levy tax on the transaction based on the contention that Vodafone was under an obligation to withhold Indian taxes when making payments to the Hutch Group.

The matter was litigated before the Bombay High Court, by a writ petition, and then before the Supreme Court. The Supreme Court remanded the matter back to the tax authorities to decide the preliminary issue of “jurisdiction.” The Supreme Court also noted that Vodafone could challenge the decision of the tax authorities on “jurisdiction” directly before the High Court.  …

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