Amit is a entrepreneur and owns 70% in a Company called Hutch. Amit lives in HONG KONG and is a RESIDENT there.
The Hutch Company does the business of Telecom in INDIA
Therodinhoods is a COMPANY based in LONDON and is registered there.
Therodinhoods contacts Amit and proposed to BUY the 70% owned by AMIT in the Hutch Company.
Amit agrees to SELL to Therodinhoods.
Amit/Hutch/Therodinhoods write to the Indian Authorities declaring their proposal to change ownership of shares and request OK.
Indian Authorities say YES GO AHEAD.
Amit SELLS his shares - Therodinhoods BUYS Amit's shares and SENDS HIM THE MONEY.
Amit is a Hong Kong resident and will pay capital gains taxes etc IN HONG KONG as per the laws there.
Therodinhoods now owns 70% of Hutch Company.
SUDDENLY Indian INCOME TAX wakes up.
INCOME TAX CLAIMS that since Therodinhoods BOUGHT SHARES OF AN INDIAN COMPANY, THEY SHOULD PAY TAXES TO THEM!
Therodinhoods tells them to FUCK OFF
They don't FUCK OFF. Instead they demand that Therodinhoods pay them 8500 CRORES DEPOSIT
Therodinhoods pays under protest.
Supreme Court tells INCOME TAX TO FUCK OFF
Says that since shares were owned by 2 NON PEOPLE OUTSIDE THE JURISDICTION OF INDIA AND TRANSFERED BETWEEN THEM, Income Tax cannot claim any money.
Thanks for explaining, Alok.
someone creates a company A in Mauritius and creates an Indian subisidiary B. 90% of A's turnover comes through B. If a company C present in US wants to buy A, then would he have to pay tax in India? What if C wants to buy B?
awesome explanation Alok
What Vodafone did was legal, but immoral. Legal because there was a loophole in the tax laws.
What the government is doing now is both moral and legal. Moral because most of the developed countries have fiddled with retrospective taxation at some point.
Vodafone is whining now because they feel that they deserve not to pay billions of $ in tax because their M&A managers were ingenuous enough to find and exploit the loophole.
It's like a three-year-old refusing to give up on a stolen candy because he feels that he deserves the candy because he was competent enough to steal it.
And yes Amit,was going through getmecabs and saw what you were talking about in the Rodinhoods open house.
Really impressed.I wish that your next venture goes even bigger