Can someone explain in simple words what the case was all about and what does the judgement says. Have read through in newspapers but have not been able to understand it clearly? Thanks in advance Amit Lakhotia Co-founder and director – www.GetMeCab.com
Vodafone taxation case
Comments
Alok Rodinhood Kejriwal
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.
Cases filed.
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.
Amit Lakhotia
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?
sriharsha b
awesome explanation Alok
sriharsha b
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
Ravi
(Amit had a subsidary Amita in Cayman Islands which owned 70% in hutch India. the rodinhoods bought this Cayman company. Whoever owns this Cayman company automatically owns Hutch India.)
Vodafone and Hutch took benefit of a loophole ibn Incone Tax Act. Both companies and their advisor E&Y knew that what they were doing (avoiding capital gains tax by selling through cross-holdings situated in tax-heavens) is not allowed in almost all developed countries and India will also soon plug this loophole.
Finance Ministry unnecessarily delayed this ammendment (to make these type of deals taxable) and when Supreme Court said to finance ministry to “Fuck Off” they brought in a retrospective ammendment to change the law from retrospective effect and make vodafone pay almost $2 billion .
Question is should vodafone acknowledge the fact that what they did was morally not correct as everyone knew that these type of transaction is not allowed in most of the nations with strong legal system and pay-up their due. But no one expects a businessman to be morally correct as far as what they are doing is not illegal and infact it was not illegal when voda purchased hutch.
The government is also functioning fully within its legal boundaries by bringing in this retrospective ammendment, but morally it should not do so as retrospective ammendments have never been introduced against the interest of assessee(voda).
What govt. is doing and what voda & hutch did is completely legal, but what govt is doing now and what voda & hutch did earlier is not morally correct.
Amit Lakhotia
Thanks harsha
Nishant Agrawal
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.