Vodafone passes tax liability of $2 bn to Hutch

British telecom major Vodafone has passed the buck on payment of tax of over $2 billion to Hutchison Telecommunications International Ltd (HTIL), the former joint venture partner of the Essar group, stating taxes are to be paid by the seller.

Vodafone recently bought the 67 per cent stake held by Hutchison. The remaining equity is held by the Ruias.

According to Vodafone Group chief executive officer (CEO) Arun Sarin, "Neither the Essar company, nor the Vodafone company, nor Vodafone-Essar (joint venture company) are party to it. Usually taxes are paid by the seller, and the seller is not any of the parties represented here".

Recently, the income tax (I-T) department had issued a show-cause notice to Vodafone-Essar asking why capital gains tax on the $11.1 billion deal should not be levied on the company.

Vodafone-Essar, on its part, has filed a writ petition in the Bombay High Court challenging the right of the tax authorities to levy a capital gains tax. The first hearing of the petition is expected on September 27.

Sarin, who was in the city to attend Vodafone-Essar's second board meeting, admitted that the I-T issue was a concern to them.

"Of course, it is a challenge. But we are working with the I-T department to figure out what is it," he said.

Sarin's statement puts the ball in HTIL's court, as the Hong Kong-based company had earlier sold its 67 per cent stake in former Hutchison-Essar to Vodafone.

Sarin, however, declined to comment on the Ruias' application for fresh telecom licences through BPL Mobile in 21 circles.

Refusing to be drawn into a controversy, Sarin said that Vodafone had got one of the best partners in the country. Vodafone-Essar Chairman Ravi Ruia also did not comment on issue, and stated: "We have a great partnership with Vodafone".

On the dearth of spectrum in the country, Sarin said that spectrum was the life blood of the telecom business and the company would be looking at garnering more spectrum for its expansion plans.

This would be done through filing more applications, he said. Apart from Sarin and Ravi Ruia, the board meeting was attended by Anshuman and Prashant Ruia (both directors of the Essar group), Asim Ghosh (MD, Vodafone-Essar) and Vikas Saraf (Essar Teleholdings CEO and director, Vodafone-Essar).