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Vodafone Hearing Live Feed


The much awaited hearing on the Vodafone matter started on 3 August 2011 before the Supreme Court (SC). The hearing is centred around the liability of tax in India as a result of the $11 billion Vodafone-Hutch deal. Taxand India follows the editorial feed from Taxsutra, covering the hearing.**

Day 1 & 2, Vodafone argued that the complex structuring of its purchase of the Indian assets of Hong-Kong based Hutchison Whampoa was not designed to avoid tax. Read commentary from day's 1 and 2 >

Day 3, Vodafone counsel continued to argue on the issue of substance over form, and specifically around the defence that its transaction, conducted in the Cayman Islands between two foreign listed companies, was not liable for Indian tax. Read commentary from day 3 >

Day 4, Vodafone continued to defend the structure of the deal explaining the differences between tax havens and off shore financial centres (OFCs). Read commentary from day 4 >

Day 5, Vodafone argued that they had operated within the law and developed their argument that India would be putting itself out of synch with global practice if it were to award its tax authorities powers to apply the retrospective tax without a change in the law. Read commentary from day 5 >

Day 6, Vodafone discussed the differences between 'Vertical trans-national structures' and 'horizontal structures' and why their deal was within the requirements of the law. Read commentary from day 6 >

Day 7, Vodafone continued its arguments surrounding tax evasion and probed into the legal provisions of the India-Mauritius Tax Treaty. Read commentary from day 7 >

Day 8, Vodafone argued that if their transaction is to be taxed, the corporate veil of Indian operating subsidiaries would need to be lifted. Read commentary from day 8 >

Day 9, Vodafone drew upon past cases to support their arguments, and reinstated the point that they were not attempting to avoid taxes. Read commentary from day 9 >

Day 10, witnessed the Court asking several questions on the powers of a holding company to dictate terms to be a subsidiary. Read commentary from day 10 >

Day 11, questions focussed on the $340mn payment made by Hutchison to Essar and asked Vodafone for details of the settlement with the UK tax authorities on a different transaction of acquisition of a German company. Read commentary from day 11 >

Day 12, the proceedings revolved around the issue of whether the matter should be examined based on Indian law or whether foreign cases should also be considered. Read commentary from day 12 >

Day 13, Vodafone Counsel Mr Harish Salve argued that there was no transfer of controlling interest situated in India, by Hutchison to Vodafone. He extensively discussed the concept of 'situs' of shares and argued that 'quantum' of shares is not relevant to determine Indian taxability. Read commentary from day 13 >

Day 14, sees the Vodafone counsel's conclusive arguments on the Hutch - Vodafone transaction where he states that only transfer of shares could be taxed and not its attributes. Read commentary from day 14 >

Day 15, proceedings revolved around the issue of income tax and whether it could be applicable to payers who do not have any presence in India. Read Commentary from day 15 >

Day 16, questions from the panel of judges focussed on whether Vodafone acquired only shares or something apart from shares and also on whether the theory of nexus could be used to bring an overseas share transfer to tax. Read commentary from day 16 >

Day 17, Vodafone counsel rounds up his overall argument; re-asserting his main contention that 'situs' of the shares is where the company is located (in this case Cayman Islands). Read commentary from day 17 >

Day 18, the Solicitor General began his arguments on behalf of the tax department. He outlined his argument, submitting that the sale of the share of CGP Investments a Cayman Islands company was nothing but an 'artificial tax avoidance scheme'. Read commentary from day 18 >

Day 19, Mr Nariman spent most of the day explaining the various clauses of the Share Purchase Agreement to show that there was much more than the sale of a solitary share of CGP Investments a Cayman Islands entity by Hutch to Vodafone. Read commentary from day 19 >

Day 20, the Solicitor General was faced with quite a few questions from the Bench on the absence of a 'look through' provision in respect of the holding-subsidiary structure and the interpretation of section 9 of the Income-tax Act, 1961. Read commentary from day 20 >

Day 21, the day was dominated by arguments on 'form vs substance ' and Mr Nariman's submission that the transfer need not be in India but only the capital asset has to be in India. Read commentary from day 21 >

Day 22, saw the Solicitor General relying on the earlier decisions of the Supreme Court in McDowell and Azadi Bachao. His arguments, had the Chief Justice comment that they would consider a middle path between the two cases. Read commentary from day 22 >

Day 23, the Solicitor General completed his arguments, re-iterating that the Cayman Islands structure was an 'artificial tax avoidance scheme'. He argued that an artificial tax avoidance scheme was not permissible. Read commentary from day 23 >

Day 24, sees the court question Vodafone counsel as to why a detailed Share Purchase Agreement was required, if Vodafone had intended to transfer all incidental rights. Read commentary from Day 24 >

Day 25, the Bench questioned Vodafone Counsel on the matter of other valuable rights which had passed through the Share Purchase Agreement ("SPA"), apart from the transfer of shares. Read commentary from day 25 >

Day 26, Mr Salve began the day with the explanation that the structure was not 'created' by Vodafone to avoid Indian tax and that the 'fiscal nullity' concept was not applicable. Read commentary from day 26 >

Days 27 & 28, Mr Chinoy took a position similar to Vodafone counsel Mr Salve and argued that the transfer of shares of a foreign registered or incorporated company, which held some/ substantial/ majority shares of Indian company, could not be subjected to tax under section 9. Read commentary from days 27 & 28 >

The hearings in the case of Vodafone which were spread over 28 days and almost 3 months have now concluded. We now await the decision from the courts.

**This article will be updated as the case continues.

Your Taxand contacts for further queries are:
Mukesh Butani
T. +91 124 339 5010

Gokul Chaudhri
T. +91 124 339 5040

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