In April this year, the I-T Department had slapped tax notice on Idea Cellular and its subsidiary, Aditya Birla Telecom respectively, in relation to transfer of assets and licences between the two companies in 2009.
Facing a tax demand of 1500 cr, Idea Cellular, today, secured interim relief from the Bombay HC. The Bombay HC has, in its order, granted an interim stay on the demand notice by barring the I-T Department from initiating recovery proceedings.
Also Read: Final guidelines on telecom M&A likely by Sept-end
In 2009, as a part of a high court approved demerger, Aditya Birla Telecom Limited (ABTL), a wholly owned subsidiary of Idea Cellular, transferred the license for the Jharkhand and Bihar Circle to its parent. This transaction was termed as a “slump sale” by the I-T Department and a tax demand of 1500 cr was raised against Idea Cellular. Meanwhile, the I-T Department had also raised a demand of 2400 cr against the subsidiary, ABTL.
Idea had contested the demand of 1500 cr before CIT (Appeal). CIT(Appeals) is the first appellate authority for seeking relief against adverse tax orders. Idea had applied for interim stay on recovery proceedings, before the I-T Department, as the matter was being adjudicated upon by CIT(appeals). The I-T Department had rejected idea’s application, which lead to Idea seeking similar relief by moving the Bombay HC.
Bombay HC, has also quashed the I-T Department order rejecting Idea’s application for seeking interim stay. The HC has directed the department to reconsider Idea’s stay application.
However, important to note, that the HC has remained silent on the merits of the case. Choosing to not adjudicate on the subject of taxability of the transaction in question, the Bombay HC has left the door open on the issue for both, Idea Cellular and the I-T Department. The question over the 1500 cr tax demand is still pending before CIT(Appeals)