Post Vodafone Tax Case, India scrutinising all major deals
The Indian Finance Ministry has announced that it is looking into tax implications of all large cross-border mergers and acquisitions, against the backdrop of the Supreme Court decision in the Vodafone case.
According to Revenue Secretary Sunil Mitra, the Department of Revenue is looking at all large financial transactions. The department is definitely looking at cross-border transactions which are a recent phenomenon. They have started these transactions since 2006, so there is need to have a look and study them thoroughly.
As per Mitra, Vodafone came in the middle of 2007. The department has been looking into a number of cases, acquisitions that have happened through overseas transactions.
The case is related to a deal in 2007 when Vodafone, through its group firm Vodafone International Holdings, bought Hutchison Telecommunications India’s (HTIL) 67 per cent stake in Hutchison Essar for over USD 11 billion.
As per the officials, the tax demand has been raised in pursuance to the direction of the Supreme Court of India dated September 27 to the Income Tax Assessing officer to determine and quantify the tax liability of Vodafone within four weeks.
Last month, the Supreme Court had refused to stay with the judgement of High Court, which ruled that Indian Income Tax Authorities have jurisdiction to tax Vodafone on its deal with Hutch.
India’s top court postpones Vodafone hearing to Nov 15
According to the lawyer for the telecom firm Harish Salve, India’s apex court has deferred the hearing of Vodafone’s $2.5 billion tax case to Nov. 15.
The decision by the Supreme Court to hear Vodafone Essar’s appeal next month came after the telco sought time to review a recent order from the Income Tax office.
Vodafone is in pursuit of a legal action on a tax bill in India over its 2007 purchase of Hutchison Whampoa Ltd’s mobile business in the country, had appealed to the Supreme Court challenging a lower court order that Indian tax authorities had jurisdiction over tax bills in cross-border deals.
Last week, the tax office asked Vodafone to pay US$2.53 billion within 30 days, but the British firm strongly disagrees with the calculation.
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Vodafone warns India over tax bill
Vodafone has warned India that it may trim down investment in the country if the company loses its appeal over a US$2.7bn tax bill.
Vittorio Colao, chief executive, specified that Vodafone may reconsider future investments in India if the country’s Supreme Court upholds an earlier decision demanding that Vodafone pay capital gains tax on its US$11.1bn purchase of a controlling stake in local operator Hutchinson Essar.
As per Reports citing Mr Colao, the tax issue will be incredibly important for us to determine how friendly India is. This is a concern for the company’s investors and for other international investors. He warned that if India continues to demand the disputed tax payment, the country’s telecoms sector would be squashed like lemon as international investors would reconsider their Indian development plans.
According to Mr Colao, Vodafone has invested more than US$1.5 billion a year into India since it joined the market three years ago and has paid almost a third of its revenues in taxes to the India exchequer. He added it was totally unacceptable that the Indian authorities have not pursued Hutchinson for capital gains tax on the 2007 sale.
The Supreme Court will set a date to hear Vodafone’s appeal on Monday. The case has been closely followed by a string of multinational companies as it could set a precedent for other cross-border takeovers in India. George Osborne has lobbied against the tax bill on Vodafone’s behalf.
SC notice to Airtel, Vodafone on BSNL plea
The Supreme Court has issued notices to Bharti Airtel and Vodafone on a BSNL petition, seeking that the private telecom operators pay interconnection charges, along with penalty, for transferring to its network their calls that did not identify phone numbers.
A bench headed by Chief Justice S H Kapadia issued notice to Bharti Airtel and Vodafone Essar Gujarat directing them to file their reply. According to the court, it would hear BSNL’s plea later, along with a similar case where the state-owned firm is in dispute with Reliance Communications.
BSNL had asked Bharti Airtel and Vodafone to pay more than US$1.96 million for routing calls with non-Caller Line Identification (CLI), partial CLI and unauthorized CLI from its Wireless in local loop, or WLL and basic landline phones from May 2003 to August 2005.
According to BSNL, as per the Interconnect Agreement with the private telcos, it is entitled to charge in highest slab, which is for incoming ISD calls.
BSNL has issued disconnection notice to the operators, which was challenged by them before the telecom tribunal TDSAT. The court, passed a temporary order on May 29, 2008, directed Airtel to deposit a sum of US$0.76 million.
However, in February 2010 Telecom arguments Settlement and Appellate court passed its final order and set aside PSU’s demand.
The order was challenged by BSNL in the Court.
It has competed that demand raised by BSNL for the relevant period is legal and BSNL is fully entitled to recover… Even the interconnect agreements signed in the year 2002 (between BSNL and Bharti) entitles it to make and raise demand.
BSNL added, “… Calls with regard to non-CLI, incomplete CLI or unauthorised CLI or wrong hand of call shall be liable to be charges at the highest slab, which is rates applicable to the IUC of incoming ISD Call”
It further submitted, “any handover of non-CLI, incomplete CLI or unauthorised CLI etc has a direct impact on the amount of IUC payable to BSNL and it is fully justified and entitled to raise demands to recover all its dues from the respondent”.
SC issues notice to A Raja on 2G spectrum scam
The Supreme Court asked the Centre and Union Telecom Minister A. Raja for a response on a plea advising the court to monitor CBI search into allegations that mobile telephony licenses issued by his ministry in 2008 cost the government US$16 billion. The court’s involvement will put further pressure on the minister, belonging to Tamil Nadu’s Dravida Munnetra Kazhagam, whose actions are already being checked out by the country’s chief auditor and the Central Vigilance Commission.
A bench, including Justices G S Singhvi and A K Ganguly, sent notices to the telecom ministry and Raja asking for replies within 10 days. The bench has also issued notice to the CBI, the Enforcement Directorate and the Income Tax department on the petition filed by the Centre for Public Interest Litigation, NGO, and others.
According to the petitioner’s lawyer Prashant Bhushan, the Centre for Public Interest Litigation has requested the court team to monitor the CBI probe. The PIL also challenges a May 2010 judgment of the Delhi High Court, which dismissed the case against Raja and the government. It’s a politically sensitive case. Court monitoring is needed to arrive at the truth. The bench sought Raja and CBI’s response on why the apex court should not monitor the probe.
The petitioners suspected that the DoT, under the minister ship of Raja, had given away 2G spectrum to 122 operators at a throwaway price of US$0.36 billion for pan-India licenses on a first-come-first-served basis in January, 2008. Raja was expected to take the auction route for allotting the 2G licenses to telecom service providers.
The CBI, in an FIR filed in November last year, blamed some DoT officials and executives of some private telecom companies of collusion in a bid to get new licenses. According to the agency, the licenses were sold without competitive bidding at a nominal rate based on prices fixed in 2001, resulting in a loss of Rs 22,000 crore to the government. During the brief preliminary hearing, the court asked why CBI’s FIR is against unknown people and slammed the central agency for not naming the people behind the alleged scam.
SC cancels fine against Telefonica
Telefonica took a breath of refief when Spain’s Supreme Court Cancelled a US$ 73.045 million fine against them.
The Court for the Defence of Competition (TDC) fined Telefonica US$ 73.045 million the biggest fine in telecom history – over a complaint made by the Spanish alternative operators’ association Astel.
The association asserted that Telefonica hampered the customers for pre-selection of operators. The service allowed Telefonica subscribers to make calls to fixed-line numbers by other operators’ networks without dialing a prefix. Spain’s National Court has now canceled the fine.
Temasek’s final appeal rejected by Indonesia’s SC
www.WirelessFederation.com/news: Singapore-based Temasek Holding’s final appeal against a decision by the country’s anti-monopoly authorities concerning its telecoms investments has been rejected by Indonesia’s Supreme Court.
Temasek Holdings has stakes in PT Telekomunikasi Selular (Telkomsel) which Indonesia’s largest cellcos by subscribers and PT Indosat through its Singapore Technologies Telemedia STT unit. However, it was forced to sell its stake in Indosat to Qatar Telecom for USD1.35 billion, following the ruling by the Komisi Pengawas Persaingan Usaha (KPPU).
The anti-monopoly commission adjudged in 2007 that Temasek and its affiliates were in breach of Indonesia’s anti-monopoly laws and ordered the sale of one of their telecom units in Indonesia. According to a spokesman for the KPPU, the Supreme Court through its verdict on 5 May 2010, as written on its official website, states that it has rejected a judicial review, filed by Temasek, over the Supreme Court decision.
