Vodafone gets huge Income Tax demand
Top mobile Company, Vodafone has reportedly been issued a $2 billion demand by the Income Tax Department relating to its purchase of Hutchison-Essar earlier this year.
Vodafone confirmed that it had received a letter from the Income Tax Department regarding the company's liability for capital gains tax resulting from its $11 billion takeover of Hutchison-Essar, India's fourth largest mobile phone operator.
While it is unusual for the buyer, rather than the seller, to receive a capital gains tax bill on such a transaction, the liability may have arisen because of the complex manner in which Vodafone structured the deal.
It seems that the purchase may have been arranged via an offshore subsidiary in Mauritius, with Vodafone-Essar acting as an 'agent' in the deal. Vodafone claims that it has received "clear" advice that no tax would be due on the deal, and that it proposes to defend its position "vigorously".