Saturday, March 15, 2025
Google search engine
HomeSpotlightVodafone Case- Wherever you go, I-T Department follows

Vodafone Case- Wherever you go, I-T Department follows

India has been greatly involved in signing of the Double Taxations Avoidance Agreements with various tax-haven countries. This has boosted the image of India as a ‘lookout destination’ for investment and an emerging hub for economical activities.

Long long ago in 2007 Vodafone International Holdings BV decided to expand its footprint in the Indian mobile phone market by buying out Hutchison Essar. But it decided to take the roundabout route via tax haven Cayman Island based subsidiary.

Vodafone International Holdings BV, based in Netherlands and controlled by Vodafone UK, obtained the controlling interest and share of CGP Investments Holdings Ltd located in Cayman Island for a value of $11.01 billion from Hutchinson Telecommunications International Ltd, which had stake in Hutchinson Essar Ltd that handled the company’s mobile operations in India. HEL had its stake in CGP Holdings, from which Vodafone bought 52 per cent of HEL’s stake in 2007, thereby vesting controlling interest over them.

This started a ‘wherever you go, we will follow’ saga of the IT department chasing the company. The Bombay High Court ruled that where the underlying assets of the transaction between two or more offshore entities lies in India, it is subject to capital gains tax under relevant income tax laws in India. An aggrieved Vodafone appealed before the Supreme Court to revisit the judgment, which makes them liable for a record amount of Rs 12,000 crores going to the tax authorities’ kitty.

The Supreme Court ruled in 2012 that Vodafone’s actions were “within the four corners of law” . Apex Court during the Vodafone issue discussed 3 landmark cases to ascertain the situation:

• In English case IRC v Duke of Westminster, it was held that it is the taxpayer’s legal right to attract least amount of tax and it will construe a situation of tax avoidance. Thus, declaring that tax avoidance is different from tax evasion.

• In McDowell & Co. V. CTO, the Honourable court held that tax avoidance is bad. The case blurred between the provisions of tax avoidance and tax evasion.

• In Union of India v. Azadi Bachao Andodal , the honorable court while disagreeing the judgment of McDowell case held that tax avoidance is valid and legally right provided that the scheme is within the parameters of law.

Supreme Court overruling the judgment of Bombay High Court held that principles lead down in Azadi Bachao Andolan were correct and court while judging such situation should give priority to legal form of the transaction and that in application of judicial anti-avoidance rule, the revenue may invoke the “substance over form” principle or “piercing the corporate veil” principle only after it is able to establish on the basis of the facts and surrounding the transaction that the impugned transaction is a sham or tax avoidant.

It also advised Indian taxmen to “look at” the transaction instead of “looking through” it to attribute motives to the deal. What the Indian government saw however was over ₹20,000 crore in unpaid taxes, interest and penalty slipping out of its hands.

It decided to strike fear into the heart of companies by coming up with the General Anti-Avoidance Rule (GAAR). This rule basically said that the government could dig up past deals, all the way back to 1962. Introduction of GAAR was announced in the Finance Act 2012. And the first draft of GAAR when published received heavy criticism and thereby Shome committee was formed to come up with recommendations and guidelines. The instant paper discusses ramification of GAAR into two parts. First part discusses the ramifications of first draft of GAAR in a general manner without going into detail and second part discusses the ramifications of recommendations given by the Shome committee.

Many provisions of GAAR have been criticised by various people. However, the basic criticism of GAAR provisions is that it is considered to be too sweeping in nature and there was a fear that Assessing Officers will apply these provisions to misuse and harass the general honest tax payer too.

There is only a fine distinction between Tax Avoidance and Tax Mitigation, as any arrangement to obtain a tax benefit can be considered as an impermissible avoidance arrangement by the assessing officer. Thus, there was a hue and cry to put checks and balances in place to avoid arbitrary application of the provisions by the assessing authorities.

The government has deferred GAAR up to April 1, 2017.

RELATED ARTICLES

LEAVE A REPLY

Please enter your comment!
Please enter your name here

- Advertisment -
Google search engine

Most Popular

Recent Comments

Aashish Mishra on Job Vacancy
dre on Quiz9 Q2
dre on Quiz9 Q3
Travis on Quiz9 Q1
Travis on Quiz9 Q2
Travis on Quiz9 Q2
Travis on Quiz9 Q3
sanco on GK1 Q1
sanco on GK1 Q4
sanco on GK1 Q6
sanco on GK1 Q8
junior on Quiz8 Q2
junior on Quiz8 Q4
junior on Quiz8 Q5
junior on Quiz8 Q7
junior on Quiz8 Q1
junior on Quiz8 Q3
junior on Quiz8 Q6
junior on Quiz8 Q8
Victor on World5 Q1
Victor on World5 Q7
demo on Book3 Q5
demo on Book3 Q3
demo on Book3 Q6
demo on Book3 Q5
demo on Book3 Q4
demo on Book3 Q2
demo on Book3 Q1
Basil2 on Quiz7 Q6
Basil2 on Quiz7 Q4
Basil2 on Quiz7 Q5
Basil2 on Quiz7 Q5
Basil2 on Quiz7 Q7
Sid on World5 Q1
Sid on World5 Q2
Sid on World5 Q3
Sid on World5 Q4
Sid on World5 Q5
Sid on World5 Q6
Sid on World5 Q7
Sid on World5 Q8
mb14 on GK1 Q7
mb14 on GK1 Q6
mb14 on GK1 Q4
mb14 on GK1 Q5
mb14 on GK1 Q3
mb14 on GK1 Q2
mb14 on GK1 Q1
mb14 on GK1 Q8
sanco on Quiz9 Q3
Michael Martens on Quiz8 Q1
Michael Martens on Quiz8 Q2
Michael Martens on Quiz8 Q4
Michael Martens on Quiz8 Q3
Michael Martens on Quiz8 Q5
Michael Martens on Quiz8 Q8
Nick Votto on World5 Q1
Nick Votto on World5 Q2
Nick Votto on World5 Q3
Nick Votto on World5 Q4
Nick Votto on World5 Q5
Nick Votto on World5 Q6
Nick Votto on World5 Q7
Nick Votto on World5 Q8
hgn on GK1 Q5
hgn on GK1 Q6
hgn on GK1 Q8
Thomas on GK1 Q1
Thomas on GK1 Q2
Thomas on GK1 Q3
Thomas on GK1 Q4
Thomas on GK1 Q5
Thomas on GK1 Q6
Thomas on GK1 Q7
Thomas on GK1 Q8
Brian Allen on GK1 Q3
Brian Allen on GK1 Q2
Brian Allen on GK1 Q2
Brian Allen on GK1 Q1
Brian Allen on Quiz9 Q1
Brian Allen on Quiz9 Q2
Brian Allen on Quiz9 Q3
Helen Carter on Quiz7 Q6
Helen Carter on Quiz7 Q4
Helen Carter on Quiz7 Q5
Helen Carter on Quiz7 Q7
Nancy Evans on Quiz8 Q1
Nancy Evans on Quiz8 Q2
Nancy Evans on Quiz8 Q3
Nancy Evans on Quiz8 Q4
Nancy Evans on Quiz8 Q5
Nancy Evans on Quiz8 Q6
Nancy Evans on Quiz8 Q7
Nancy Evans on Quiz8 Q8
James Smith on World4 Q2
James Smith on World4 Q3
James Smith on World4 Q4
James Smith on World4 Q5
James Smith on World4 Q6
James Smith on World4 Q1
Jeff King on Book3 Q5
Jeff King on Book3 Q4
Jeff King on Book3 Q3
Jeff King on Book3 Q2
Jeff King on Book3 Q1
Linda Walker on Quiz9 Q1
Linda Walker on Quiz9 Q2
Linda Walker on Quiz9 Q3
Linda Walker on World5 Q1
Linda Walker on World5 Q3
Linda Walker on World5 Q2
Linda Walker on World5 Q4
Linda Walker on World5 Q8
Linda Walker on World5 Q7
Linda Walker on World5 Q5
Linda Walker on World5 Q6
Donald Gracia on Quiz7 Q4
Donald Gracia on Quiz7 Q6
Donald Gracia on Quiz7 Q5
Donald Gracia on Quiz7 Q7
Donald Gracia on Quiz7 Q5
Donald Gracia on Quiz7 Q7
Betty Adams on GK1 Q1
Betty Adams on GK1 Q3
Betty Adams on GK1 Q3
Betty Adams on GK1 Q4
Betty Adams on GK1 Q5
Betty Adams on GK1 Q6
Betty Adams on GK1 Q7
Betty Adams on GK1 Q8
Prathibha Prakash on commerceduniya
surya prakash kumawat on Vacancies of CA Articleship in Delhi NCR
i want all ipcc exam paper of last five years on Question paper of Advanced Accounting May 2013 exam of CA IPCC
syed on commerceduniya
sonali navale on commerceduniya
ramesh on commerceduniya
jailaxmi.ece@gmail.com on Contract Law_Answer_Dec 2011
miankshee on commerceduniya
yatish lalwani on dariakoreczak@gmail.com
Parvez Virani on dariakoreczak@gmail.com
Rahul Vats on mabum2@facebook.com
Narendra Boyina on Gimme one more chestnut!
Gayatri Sinha on
cduniya on industrial_training