In a big relief to Vodafone, the Supreme Court has ruled in favour of Vodafone regarding the tax lawsuit which has been pending for the last 3 years.
The court has said that the Indian tax department cannot tax the transaction that saw Vodafone acquire 67 per cent stake in Hutchison Essar. The deal was for 55,000 crores or $11.5 billion.
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.
“The government has no jurisdiction over Vodafone’s purchase of mobile assets in India as the transaction took place in Cayman Islands between HTIL & Vodafone,” [source]
Also, the apex court directed the tax department to return Rs 2,500 crore deposited by Vodafone in compliance of its interim order within two months.
This case has set the benchmark for cross-border deal and at least 8 other companies are facing similar litigation.