CK Hutchison’s international telecommunications arm received a bill of INR79 billion ($1.23 billion) from India’s tax authorities for fees dating back to Vodafone’s acquisition of its operation in the country during 2007.
In an announcement acknowledging the receipt of the demand, the Hong Kong-based company maintained the transaction was not taxable in India, in-line with an earlier decision made by the country’s supreme court.
The fee is for capital gains relating to Vodafone Group’s $10.7 billion acquisition of Hutchison’s Indian telecoms unit a decade ago.
Following an initial dispute on payment of tax on the deal, in 2012 the Indian Supreme Court ruled in favour of the operators, deciding the deal was outside of the tax authority’s remit.
However, since the decision five years ago new guidelines have been introduced on foreign investment in India leading to the threat of retrospective action on the Vodafone Hutchison deal.
The new demand was slapped on the company in early August following an ‘assessment order’ completed by the Indian authority in January. The order concluded CK Hutchison was liable for an INR79 billion tax bill in addition to INR164.3 billion in interest.
In a statement, Hutchison Telecommunications International said its legal advisors believed the order was issued: “On the basis of retrospective legislation seeking to overturn the judgment of the Supreme Court of India in January 2012, which ruled that the acquisition was not taxable in India”.
The company added the tax demand was “in violation of the principles of international law.”