India’s Income Tax Department has slapped a Rs 32,320 crore demand in tax, interest and penalty on Hutchison for alleged capital gains from the $11 billion sale of its India telecom business to Vodafone Group in 2007.
Billionaire Li Ka-shing’s CK Hutchison Holdings — in a filing to the Hong Kong stock exchange — said Hutchison Telecommunications International (HTIL) has received a tax demand of about Rs 7,900 crore, Rs 16,430 crore of interest and another Rs 7,900 crore in penalty.
The CK Hutchison unit continues to dispute the validity of those taxes, PTI reported.
Earlier, the India Government slapped Rs 7,990 crore tax demand on UK-based Vodafone Group for not withholding tax from payments it made to Hutchison. The outstanding after including interest and penalty runs over Rs 20,000 crore.
Vodafone, which was planning an IPO in India, challenged the levy and the Supreme Court in January 2012 ruled that the company was not liable to pay any tax over the acquisition of assets in India from Hutchison.
Following this set back, the government in May 2012 amended the tax laws with retrospective effect and claimed taxes. Vodafone disputed such levy and the matter is before an international arbitration panel.
HTIL received on 13 February, 2017 from Income Tax an assessment order dated 25 January, 2017 in respect of tax of approximately Rs 7,900 crore on capital gains in connection with the 2007 deal plus aggregate interest of approximately Rs 16,430 crore.
HTIL received on 9 August, 2017 from Income Tax authorities a penalty order dated 3 July, 2017 for a penalty of approximately Rs 7,900 crore.
The company said taxes cannot be imposed on HTIL. HTIL said the order issued by the income tax is on the basis of retrospective legislation seeking to overturn the judgment of the Supreme Court of India in January 2012, which ruled that the acquisition (by Vodafone) was not taxable in India, are in violation of the principles of international law.
Vodafone acquired 67 percent stake in the mobile-phone business owned by Hutchison Whampoa, now part of CK Hutchison.
The draft assessment order alleged gains of about Rs 37,400 crore in the 2007 sale to Vodafone International Holdings.
Vodafone Group is currently in the process of merging its Indian telecom subsidiary with rival Idea Cellular to create the largest telecom operator in India.