Vodafone Told to Pay Penalty Relating to Indian Tax Dispute
April 05, 2011, 9:19 AM EDTBy Jonathan Browning
April 5 (Bloomberg) -- Vodafone Group Plc, the world’s largest mobile-phone company, may need to pay a penalty fine as part of an Indian tax case related to its acquisition of Hutchison Whampoa Ltd.’s local unit in 2007.
Vodafone filed a petition in the Supreme Court in New Delhi seeking protection, the Newbury, England-based company said today in an e-mailed statement. Indian tax authorities have started penalty proceedings against the company, with the fine potentially worth as much as 100 percent of any tax due.
India is seeking 112 billion rupees ($2.5 billion) on Vodafone’s $11 billion purchase of the Hutchison unit. Vodafone was ordered to set aside 25 billion rupees as a deposit, while it challenges a tax bill for the country’s largest cross-border deal.
“Seeking penalties on a ‘test case’ involving a major infrastructure investor highlights the unpredictable nature of India’s taxation policy,” Vodafone said today. “This move is only likely to raise further concerns amongst potential investors in India.”
R.N. Dash, director general for international taxation at the Central Board of Direct Taxes in New Delhi, confirmed today that his office sent a penalty notice. He declined to comment further.
Vodafone said it doesn’t owe the Indian government taxes because the transaction was conducted offshore, with its Dutch subsidiary, Vodafone International Holdings BV, acquiring CGP Ltd., a Cayman Islands holding company controlled by Hong Kong- based Hutchison.
Vodafone said last month it will buy out partner Essar Group in its Indian joint venture, the country’s third-largest operator, for $5 billion, taking its holding to 75 percent.
Vodafone is increasing its stake in the venture in one of its fastest growing markets. India was one of the “jewels” in the three months through December, Chief Executive Officer Vittorio Colao said in February.
--With assistance by Anto Antony and Sam Nagarajan in New Delhi Editors: Simon Thiel, Robert Valpuesta.
To contact the reporter on this story: Jonathan Browning in London jbrowning9@bloomberg.net.
To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net
