AAR adjourns Vodafone case to July 1, Essar objects

The famous pug may be long gone, but tax and drama seem to follow Vodafone everywhere in India.

Amidst high drama in a packed courtroom, the Authority for Advance Rulings (AAR) on Friday adjourned Vodafone’s application over its $5 billion deal to July 1, despite strong objections from its joint venture partner in India — Essar.
The day began with Vodafone counsel Dr Abhishek Manu Singhvi springing a surprise on those present, with a request for adjournment. He stated that the submissions of revenue were heavy and voluminous and hence he needed time to reply to the same.

Essar counsel Soli Dastur vehemently objected to Vodafone’s adjournment request since the deadline for making payment is May 27.

“Knives are out,” Singhvi remarked at that point, to which Dastur took grave offence. After hearing both sides patiently, the AAR chairman observed that he would like to hear Vodafone before passing any ruling. The AAR has set July 1 as the next date for hearing.

Essar group holds 33% equity in Vodafone Essar — around 22% held through two Mauritius entities and 11% held directly by an Indian company. Essar is exiting the joint venture with Vodafone by selling this 33% stake to the latter for around $5 billion. The likely buyer of this stake, a Vodafone entity in Mauritius, has approached the AAR to determine applicability of tax deducted at source under section 195 on the consideration for 22% share transfer.

IT department counsel and former director general - international tax, G C Srivastava, had earlier argued that it was a unique case of ‘dual residency’.
   

Giri is editor, www.taxsutra.com