There seems to be no end to the troubles that are facing Vodafone. After its petition was rejected by the Bombay High Court in September questioning the jurisdiction of the IT department in the ongoing tax battle, the Supreme Court refused to stay the Bombay HC’s order.

The British mobile services giant had purchased 52 percent of Hutchinson's stake in Hutchinson Essar  for $10.9 billion (Rs. 52,320 crores) in 2007. One of the biggest deals in mobile telephony, it set a precedent for cross-border transactions in India. The IT department had issued a notice relating to the tax owed to them in the purchase to Vodafone for a whopping $2.6 billion (Rs. 12,000 crore). The tax department had alleged that since Hutchison made capital gains in the sale transaction, Vodafone should have deducted tax on it.

The IT department had sent a notice to the company in May and in that notice had qualified Vodafone as an agent of Hutchison. It is widely believed that since the IT department cannot take any action against Hutchison since it has no presence in India, it is taking this new route to recover taxes from the company.

The company whose earlier petition was rejected by the Bombay HC has said in a statement the Income Tax department cannot treat them as agent in default as the basic issue of jurisdiction is contested by them and the matter is currently under appeal in the Supreme Court and any action of this sort at this point of time will be premature on the part of the department.

In the present writ petition also, the company is being represented by their regular counsels in the case, Duttmenon Dunnmorrsett. The Vodafone case has seen some major legal personalities associate themselves with the case, which is seen as the benchmark for all future cross border transactions. In the first round ALMT Partners Aliff Fazelbhoy and Hitesh Jain along with Senior Counsels Iqbal Chagla and Dinesh Vyas had argued for Vodafone. Noted jurist and Senior Advocate Fali Nariman had argued on behalf of the British telecom major in the Supreme Court. 

Then at the Bombay HC this September, Duttmenon was assisted by Senior Counsels Harish Salve and Abhishek Manu Singhvi. The case will now be fought on two levels, at the SC and at the Bombay HC. The next date for hearing in the case by the apex court is October 25 while the next date of hearing at the Bombay HC is October 22.

Reference No: WP/1325/2010

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