Vodafone seeks legal opinion on tax notice

UK-based mobile firm Vodafone, which acquired majority stake in Hutchison-Essar earlier this year, is understood to have sought legal opinion after it received a notice from income tax deparment for not paying about two billion dollars in tax for the deal.

Sources said I-T deparment has sent a notice to Vodafone for not paying capital gains tax, arguing that the company should have deducted tax at source while making payment to Hong Kong-based Hutchison Telecom International Ltd.

According to sources, Vodafone is studying the notice and seeking a legal opinion. It may also make a statement in a day or two. Legal opinion has been sought on who should pay the tax -- Vodafone or Hutchison, they said,

adding since no precedence existed about capital gains tax on this kind of transaction a legal view was necessary.

A Vodafone spokesperson refused to comment on the issue.

Sources said to an extent, Vodafone is also studying the case of Tata Steel acquiring Anglo-Dutch steel company Corus and trying to find out whether any capital gains tax was paid by either of the companies to Indian or UK's tax department.

Vodafone had acquired majority stake in Hutchison-Essar for $10.9 billion and the capital gains tax comes to about $2 billion.

Sources in Vodafone also claimed that Hutchison should be held resposnible for any such payment of tax and not the British firm. They said it was built in the deal.