Vodafone wins 2.5 billion dollar tax case

New Delhi: In a 2.5 billion dollar sigh of relief for Vodafone, and for other companies eyeing assets in India, the Supreme Court has ruled in favour of Vodafone. The court has said that the Indian tax department cannot tax the transaction that saw Vodafone acquire 67 per cent stake in Hutchison Essar, a mobile phone operator in India in 2007 . The deal was for 55,000 crores or $11.5 billion.

The Supreme Court has said that Indian tax officials do not have jurisdiction over a deal between two global companies, even if the assets involved in that deal are located in India.

Vodafone had argued that India cannot levy taxes because the transaction was made between non-Indian companies outside the country. Vodafone lost its case in the Bombay High Court in 2008 and then appealed against that verdict in the Supreme Court.

Tax officials however said the sale was taxable because the assets acquired by Vodafone are based in India. The government said Vodafone had failed to deduct or withhold capital gains tax at the time of purchase. Capital gains tax is imposed on the profit earned after selling an asset.