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BW Businessworld

The Last Resort

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Less than a month after the Supreme Court (SC) gave its landmark judgement in the Rs 11,200-crore Vodafone tax case, which was hailed as a benchmark for all future mergers and acquisitions by foreign entities, the government has sought its review.

The SC had said in its verdict that "the offshore transaction was a bonafide structured FDI investment into India which fell outside India's territorial tax jurisdiction, hence not taxable". The government's contention is that the case did not involve any inflow of money into India because the sale consideration was paid outside India by VIH, a British Virgin Island Company, to Hutchison Telecommunications International (Cayman) Holdings, a Cayman Islands company. So, is that likely to strengthen the government's case? That seems unlikely. A former bureaucrat says the issue of FDI should have been raised when the court was hearing the case, and not in a review petition. A corporate lawyer says a change in the judgement is now possible only if there is discovery of new material in the case. Sources point out the government is seeking a review because of the funds crunch it is facing. It hopes to prop up its finances with the Rs 11,200 crore in question.      

(This story was published in Businessworld Issue Dated 05-03-2012)