Essar affiliated Loop Telecom may have to cough up income tax, as in the case of the Hutch-Vodafone deal, for transfer of its shares between two overseas sister companies. The Reserve bank of India (RBI) has asked for a probe by the Department of Revenue into transfer of Loop Telecom shares between two Mauritian subsidiaries of Khaitan Group at Rs 184 crores — a price lower than the prevailing market rate of Rs 2,396 crore.

“The government may like to examine the tax angle involved in transfer of shares between non-residents, in light of (the) Department of Revenue’s stance in the case of Hutch-Vodafone deal,” RBI wrote to the finance ministry on August 3.

Shares were transferred overseas from Capital Global Ltd (Mauritius) to Kaif Investment (Mauritius). Khaitan’s non-resident Santa Trading is the majority owner of Loop Telecom, which acquired licences to operate telecom services in 22 circles in January 2008.

The Department of Revenue, through the income tax department, had demanded tax payment of $1.7 billion from Vodafone for acquiring 52 per cent in Hutch in the erstwhile Hutch-Essar for around $11 billion in 2007. Though the transaction between both companies was overseas, the I-T department said Vodafone was liable for tax as its purchase was for a firm with India operations.

The inquiry for the Khaitan case came to light while the RBI was probing violations of foreign direct investment norms. The regulator has said that the share transfer neither violates the FDI policy nor the reporting norms as there was no flow of funds out of or into the country.

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