Details

Service: Tax, International Corporate Tax, Mergers & Acquisitions
Type: Regulatory update
Date: 1/20/2012

India - Text of Supreme Court’s decision in 'Vodafone'

January 20: The Supreme Court of India today issued a taxpayer- favorable judgment in the Vodafone case, which concerns the taxation of cross-border mergers and acquisitions involving an indirect sale of shares of an Indian company.

Text of the judgment: Vodafone International Holdings B.V.

Vodafone is a landmark decision that provides greater certainty for companies engaged in or considering international cross-border transactions with Indian companies. The Vodafone decision reaffirms a present understanding of the Indian tax law—that the overseas transfer of shares of a foreign company is not liable to tax in India.
Although facts and circumstances of each transaction need to be carefully examined to determine the underlying tax implications, the Vodafone decision can serve as a useful guide to understanding and assessing the risk of additional Indian taxes being payable, either by a seller or buyer, of businesses with operations in India.
The government, however, could respond to the Vodafone decision by proposing changes in the forthcoming Indian Union Budget (March 2012) or could choose to pursue legislative changes that would render the decision moot.

The appeal was from the Bombay High Court held in September 2010 that the Indian tax authorities had jurisdiction to seek taxes (of approximately US $2.5 million) from Vodafone International Holdings B.V. on its 2007 purchase of a foreign entity’s telecom operations in India. The September 2010 decision was in line with the original High Court decision of December 2008, which held that the transaction involved a transfer of a capital asset situated in India.

The Supreme Court of India today issued a decision for the taxpayer. Additional analysis will be provided soon.

For background discussions of the Vodafone case: India - Summary of Supreme Court proceedings in Vodafone case concerning the Indian taxation of cross-border M&A with indirect transfer of shares

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