Vodafone: Expectations from Marathon SC Hearing!

By: Daksha Baxi, Executive Director, Khaitan & Co

The Indian Supreme Court held a marathon hearing in the case of Vodafone and the decision of the Court is expected any time soon.  
The brief facts of the case are that Vodafone BV, a Dutch company of the UK based Vodafone Group bought one share from Hutchison International, a Cayman Islands company, of another Cayman Islands company (CGP) at a consideration of USD 11.1 billion. The only asset that CGP held were the shares in several subsidiaries in Mauritius which in turn held an aggregate of 67% shares in the Indian telecom company- Hutchison Essar Limited. Hutchison International realised a substantial capital gain on this sale. The Indian tax department sought to tax this gain in India. It argued that since the value that CGP derived was due to the value of the business of the Indian telecom company, the same should fall within the tax net in India. In such a case, they also claimed that Vodafone, which is the purchaser, was required under the Indian law to deduct the Indian capital gains tax at the time of paying the purchase consideration to Hutchison International. The Indian tax department held Vodafone as being in default of Indian income tax law provisions.
Vodafone approached Bombay High Court, claiming that since the transaction involved transfer of a share