Mar 20 2012 , New Delhi
In a setback to the government, the Supreme Court on Tuesday dismissed the Centre’s petition for review of in the top court verdict in the Vodafone’s capital gains tax case.
The apex court in a brief order said “no merit” was found in the review petition filed by the government against its January 20 judgement. In the verdict, the top court had quashed the income tax department’s notice to Vodafone for recovery of nearly Rs 12,000 crore as tax on capital gains for investment made it in India's telecom sector.
“We have carefully gone through the review petition filed by the Union of India on February 17. We find no merit in the review petition. The petition is, accordingly dismissed,” a bench of chief justice of India SH Kapadia and justices KS Radhakrishnan and Swatanter Kumar said. The same bench also delivered the verdict.
As per the Supreme Court’s rules on procedure for hearing the cases, a review petition is also heard by the same bench, which deli-vers the main verdict. A revi-ew petition is only admitted if petitioner has establish an “error” of fact, or law in the verdict sought to be revie-wed, otherwise it would not be entertained. The review petition was decided in a chamber hearing by the bench as is normal practice.
The I-T department had sought tax on capital gains from Vodafone for acquiring the shares of Hutchison in a deal signed in a third country in 2007. Hatchison at that time had invested in Indian telecom sector in a joint venture with Essar.
The apex court in its January 20 verdict had ruled that the Indian Income Tax Act would not apply to any off shore agreement between two foreign companies for acquiring of shares even if the company so acquired was already doing business in India if they were paying tax in the country of their registration.
The main grounds for review laid down by the Centre was that the price of $ 11.08 billion paid by Vodafone in a deal signed in a foreign land was only an “accidental or consequential” transfer of share and be recognised independently of the right and entitlement of Hutchison Telecom India in relation to its business in India, therefore, it was covered under the tax laws of the country.
The government further had said that the apex court should take into consideration different provisions of I-T Act in “extensive” manner with regard to transfer of property as defined in section 2(47) of the Act and it should be read with section 9 to have an “inclusive definition” for the purpose of direct or indirect transfer of such property in India, which would make it liable to be taxed as per the Indian laws.
The apex court in its verdict had said the issue arising out of the Vodafone case had far wider dimension of the flow of the FDI towards "the location with a strong governance infrastructure, which Includes enactment of laws and how well the legal system works.”
The CJI and the two judges in their verdict had ruled, “by applying the ‘look at’ test in order to ascertain the true nature and character of the transaction (between two foreign companies), we hold, that the offshore transaction herein is a bona fide structured FDI investment into India which fell outside India’s territorial tax jurisdiction, hence not taxable.”
The apex court in a brief order said “no merit” was found in the review petition filed by the government against its January 20 judgement. In the verdict, the top court had quashed the income tax department’s notice to Vodafone for recovery of nearly Rs 12,000 crore as tax on capital gains for investment made it in India's telecom sector.
“We have carefully gone through the review petition filed by the Union of India on February 17. We find no merit in the review petition. The petition is, accordingly dismissed,” a bench of chief justice of India SH Kapadia and justices KS Radhakrishnan and Swatanter Kumar said. The same bench also delivered the verdict.
As per the Supreme Court’s rules on procedure for hearing the cases, a review petition is also heard by the same bench, which deli-vers the main verdict. A revi-ew petition is only admitted if petitioner has establish an “error” of fact, or law in the verdict sought to be revie-wed, otherwise it would not be entertained. The review petition was decided in a chamber hearing by the bench as is normal practice.
The I-T department had sought tax on capital gains from Vodafone for acquiring the shares of Hutchison in a deal signed in a third country in 2007. Hatchison at that time had invested in Indian telecom sector in a joint venture with Essar.
The apex court in its January 20 verdict had ruled that the Indian Income Tax Act would not apply to any off shore agreement between two foreign companies for acquiring of shares even if the company so acquired was already doing business in India if they were paying tax in the country of their registration.
The main grounds for review laid down by the Centre was that the price of $ 11.08 billion paid by Vodafone in a deal signed in a foreign land was only an “accidental or consequential” transfer of share and be recognised independently of the right and entitlement of Hutchison Telecom India in relation to its business in India, therefore, it was covered under the tax laws of the country.
The government further had said that the apex court should take into consideration different provisions of I-T Act in “extensive” manner with regard to transfer of property as defined in section 2(47) of the Act and it should be read with section 9 to have an “inclusive definition” for the purpose of direct or indirect transfer of such property in India, which would make it liable to be taxed as per the Indian laws.
The apex court in its verdict had said the issue arising out of the Vodafone case had far wider dimension of the flow of the FDI towards "the location with a strong governance infrastructure, which Includes enactment of laws and how well the legal system works.”
The CJI and the two judges in their verdict had ruled, “by applying the ‘look at’ test in order to ascertain the true nature and character of the transaction (between two foreign companies), we hold, that the offshore transaction herein is a bona fide structured FDI investment into India which fell outside India’s territorial tax jurisdiction, hence not taxable.”
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