"Vodafone is payer in this case. So, it has a liability of payer," G C Srivastava, Director General (International Tax) in the Ministry of Finance, told reporters on the sidelines of an Assocham seminar in New Delhi.
Liability of payer and payee is different. Vodafone has a liability of payer, Srivastava said, indicating that Vodafone should have deducted tax at source before making payment to Hutchison and deposited it in the kitty of the government.
The Income Tax deparment has sent a notice to Vodafone, seeking around $1.7 billion in capital gains tax related to the sale of Hutchison Telecom International Ltd's 67 per cent stake in Hutch-Essar, now renamed Vodafone-Essar.
the company has contested this notice and approached the Bombay high court.
Last week, Vodafone CEO Arun Sarin, who is also Vice-Chairman of Vodafone-Essar, had said the company was not liable to pay tax.
"We are working with the Income Tax Department to sort this issue. Neither the Essar Group, nor Vodafone, nor Vodafone Essar is liable to pay taxes. It is the seller who should be taxed; and the seller is not one of the parties represented here," Sarin had said.
In May, Vodafone Group Plc had paid $11.2 billion to HTIL for acquiring controlling stake in Hutchison Essar.