Vodafone is a major telecom provider in India. Photo: Reuters
Vodafone is a major telecom provider in India. Photo: Reuters

India’s income-tax department has now trained its guns on Hong Kong-based Hutchison Telecommunications International Ltd (HTIL) in connection with its alleged capital gains during the US$ 11-billion sale of its India mobile business to UK’s Vodafone Group in 2007.

The tax department has slapped a Rs 323.20 billion (US$ 5.05 billion) demand in tax, interest and penalty. It includes Rs 79 billion (US$ 1.24 billion) in tax, Rs 164.30 billion (US$ 2.57 billion) as interest, and another Rs 79 billion (US$ 1.24 billion) in penalty, reports PTI news agency.

So far, the Indian tax authorities have been pursuing Vodafone for tax, but this is the first time a tax demand has been raised against HTIL, a unit of CK Hutchison Holdings, owned by Hong Kong’s richest man Li Ka-shing.

Vodafone was earlier slapped with a tax demand for not withholding tax from payments it made to Hutchison. The outstanding after including interest and penalty was Rs 200 billion (US$ 3.13 billion).

It challenged the levy and the Indian Supreme Court in January 2012 ruled that Vodafone was not liable to pay any tax over the acquisition of assets in India from Hutchison.

Thereafter, the Indian 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.

In its filing to the Hong Kong stock exchange, CK Hutchison Holdings stated that the orders of Indian tax authorities have been issued on the basis of “retrospective legislation seeking to overturn the judgement of the Indian Supreme Court, which ruled that the acquisition was not taxable in India, are in violation of the principles of international law.”