SC Vodafone verdict may hamper tax transparency,says govt

The Government says the case did not involve any inflow of monies into India because the sale consideration was admittedly paid outside India by VIH,a British Virgin Island Company to Hutchison Telecommunications Int (Cayman) Holdings Ltd a Cayman Island company.

The Government says that the FDI policy was in no way under challenge or scrutiny in the instant case. Besides FDI policy of the government and the interpretation of taxing statutes operate in two different realms,it added.

It argues that it was a patent error in the finding that the offshore transaction,which gave the Vodafone holding company a 67 per cent stake in Hutch-Essar,was “bonafide,” “structured FDI” into India.

A three-judge Bench on January 20 declared that both Vodafone and Hutch were not “fly by night” operators or short-term investors and had contributed substantially — Rs 20,242 crore — to the exchequer between 2002-03 and 2010-11,both by way of direct and indirect taxes.

The review finds fault with the court relying on the provisions of the Direct Tax Code Bills of 2009 and 2010 as one of the reasons to base its judgments on. The petition questions why the court relied on Direct Tax Code Bill 2009,when the Bill has not even been presented in Parliament,but was only a draft put up for public discussion.

The Centre said the court had failed to appreciate that Vodafone had a presence in India at the time of the transaction; it was a joint venture with Bharti Airtel.

Court ruling to affect other sectors: Sibal

New Delhi: The Supreme Court judgement cancelling 122 telecom licences allocated on first-come-first serve basis has ramifications for other sectors like mining where the same principle is adopted,Telecom Minister Kapil Sibal has said.

“I have been saying this repeatedly that the impact of the judgement is far-reaching. It has implications not only on the (telecom) sector but on other sectors as well,” Sibal said. “We will do that. As and when we do that,we take that decision,it will be placed in public domain,” he said.