TIL Desk/Business/New Delhi-Vodafone Plc’s Rs 14,000-crore tax dispute with the government remains a key risk in the merger of its Indian subsidiary with Idea Cellular. The British telecom company had sought advice on how to deal with the retrospective tax in case it went ahead with the merger, tax experts said.
“Apart from breaching revenue, subscriber and spectrum caps in a few circles, Vodafone’s unresolved tax issues are a risk in the transaction. Who will control the merged entity could be another deal breaker,” said a tax lawyer. “Vodafone Plc has sought clarity on the past tax issues so that these should not cloud the merger process,” the lawyer added.
The case pertains to a Rs 7,990 crore demand raised by the government on Vodafone International Holdings for failing to deduct tax on capital gains made during its acquisition of a 67 per cent stake in Hutchison Essar. Vodafone did not pay the tax because it was an offshore deal. However, the government argues Vodafone is liable because the deal involved transfer of an underlying Indian asset. The total tax demand stands at Rs 14,300 crore, which includes interest and penalty.
