The division bench, consisting of Justices S Radhakrishnan and A Nirgude, while dismissing the petition, stayed the operation of its order for eight weeks to enable the Company to file a special leave petition in the Supreme Court.
Vodafone Group Plc last year paid 11.1 billion dollars to a unit of Hong Kong’s Hutchison Whampoa for a controlling stake in an Indian mobile operator.
Following this, the income tax department had issued a notice stating that Vodafone was liable to pay capital gains tax as most of the assets it bought were based in India.
Against the notice, the Company moved the court and contended that Vodafone is a Dutch company and Hutchison is incorporated in Cayman Islands and therefore Income Tax Act des not apply in such a situation.
It was also brought to the notice of the Court that a share-purchase did not amount to transfer of capital assets which could be taxed.
Opposing the petition, Additional Solicitor General of India, Mohan Parsan, appearing on behalf of the IT department, said Vodafone is liable because it was expected from the company to deduct capital gains tax, while making payment to Hutchison.
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