I-T dept seeks Rs 32k cr from Hutchison

Team Udayavani, Aug 30, 2017, 9:35 AM IST

New Delhi : The I-T department has slapped a Rs 32,230 crore demand in tax, interest and penalty on Hong Kong-based Hutchison for capital gains made on the INR 704.25 billion sale of its mobile business to UK’s Vodafone Group in 2007.

In a filing to the Hong Kong stock exchange, billionaire Li Ka-shing’s C K Hutchison Holdings Ltd said its unit, Hutchison Telecommunications International Ltd (HTIL), has been served with a tax demand of about Rs 7,900 crore, Rs 16,430 crore of interest and another Rs 7,900 crore as penalty.

The C K Hutchison unit continues to dispute the validity of those taxes, it said. This is the first time a tax demand on the Hong Kong firm is being raised. So far, the Indian government had been pursuing the tax from Vodafone. The UK-based group was initially slapped with Rs 7,990 crore tax demand for not withholding tax from payments it made to Hutchison. The outstanding after including interest and penalty runs over Rs 20,000 crore.

It challenged the levy and the Supreme Court in January 2012 ruled that the company was not liable to pay any tax over the acquisition of assets in India from Hutchison. Thereafter, the government in May 2012 amended the tax laws with retrospective effect and claimed taxes. Vodafone has disputed such levy and the matter is before an international arbitration panel.

Besides Vodafone, the retrospective legislation was used to levy a principal tax liability of Rs 10,247 crore on another British company, Cairn Energy Plc. That matter, too, is before an international arbitration panel. HTIL, an indirect wholly owned subsidiary of C K Hutchison Holdings Ltd, received from the tax department a draft assessment order dated November 24, 2016, alleging gains made on the sale of its entire 67% in the India business to Vodafone.

Further, “HTIL received on August 9, 2017, from the income tax authorities a penalty order dated July 3, 2017, for a penalty of approximately Rs 7,900 crore”, the filing stated. The taxes cannot be validly imposed on HTIL, the filing said, adding that the order issued by the income tax is on the “basis of retrospective legislation seeking to overturn the judgement of the Supreme Court of India in January 2012, which ruled that the acquisition (by Vodafone) was not taxable in India, are in violation of the principles of international law”.

The draft assessment order alleged gains of about Rs 37,400 crore in the 2007 sale. he deal happened when HTIL was a listed company. Subsequent to that, HTIL was privatised and ceased business operations. Neither HTIL nor its subsidiaries have any presence in India.