The British telecom major described a reported statement of Finance Secretary RS Gujral as 'completely untrue' on the tax issue and said it had never received any communication from authorities to withhold tax while making payment to Hutchison.
British telecom major Vodafone on Tuesday described a reported statement of Finance Secretary RS Gujral as "completely untrue" on the tax issue and said it had never received any communication from authorities to withhold tax while making payment to Hutchison.
"This is completely untrue. At no point before the transaction concluded and the payment was made did any entity of the Vodafone Group receive any communication at any of its business addresses from the Indian Tax Authorities requesting a payment of withholding tax," Vodafone said in a statement.
It was reacting to a statement by Gujral that Vodafone was advised to withhold tax while making payments to Hutchison to acquire its stake in Hutchison Essar Ltd in USD 11.2 billion deal in May 2007.
Vodafone, however, said, "prior to the closing of the transaction, some letters were sent by the Tax Authorities to Hutchison" we repeat, these were not sent by the Tax Authorities to Vodafone. In any event none of these gave any indication that the Tax Authorities were re-interpreting 45 years of settled tax practice".
Moreover, it added, "at the time of the transaction, both Vodafone and Hutchison received extensive legal advice based on the law at that time.
"This advice unanimously concluded that the transaction was not taxable in India. Consequently, there was no legal basis on which Vodafone could have withheld tax from the payment to Hutchison."
The company also described as "completely fallacious" the statement of Gujral that Vodafone has been trying to avoid taxes in India through setting up different structures.
"This is completely fallacious. The structure was set up by Hutchison, not Vodafone, over a period of 14 years throughout which its investment into India grew", it said.
The controversy pertains to Finance Minister Pranab Mukherjee's Budget proposal to amend Income Tax Act, 1961, with retrospective effect to bring into tax net Vodafone-type merger and acquisition deals involving domestic assets.
The proposal has generated lot of debate, with various global bodies claiming that the move would hurt foreign investment.
Once the amendment is approved by Parliament, the government may initiate the process of raising a tax demand of about Rs11,000 crore for its acquisition of Hutchison's stake in Hutchison Essar. The Supreme Court had set aside IT department's demand for the tax.
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