SC seeks Vodafone's response to IT Dept plea

SC seeks Vodafone's response to IT Dept plea New Delhi: The Supreme Court Monday sought Vodafone Essar Gujarat Ltd's (VEGL) response to the Income Tax Department plea challenging the demerger scheme of VEGL and a group company of the telecom major.

The Income Tax Department has challenged the Gujarat High Court's decision approving the Scheme of Arrangement related to VEGL gifting its "passive infrastructure assets" to another group firm, Vodafone Essar Infrastructure Ltd (VEIL).

The high court on August 27 had brushed aside the tax department's objection that the scheme was a "camouflage" to avoid paying capital gains tax and stamp duty of around Rs 3,500 crore and Rs 600 crore respectively, payable on transfer of the assets estimated to be over Rs 15,000 crore.

A bench comprising Chief Justice Altamas Kabir and justices S S Nijjar and J Chelameswar issued notice to VEGL seeking its response within four weeks.

The scheme was a consolidated plan by seven Vodafone group companies transferring their "passive infrastructure assets" of mobile communication towers to VEIL, out of which only one transferor company was situated in Gujarat.

VEGL decided to demerge its infrastructure assets, along with six other group firms to Vodafone Essar Infrastructure in 2007.

The other six companies included Vodafone Essar Ltd, Vodafone Essar Mobile Services Ltd, Vodafone Essar East Ltd, Vodafone Essar South Ltd, Vodafone Essar Digilink Ltd and Vodafone Essar Cellular Ltd.

The department had objected to the scheme on the ground that the transfer of Vodafone Essar Gujarat's assets to Vodafone Essar Infrastructure by way of gift was with the sole objective of avoiding taxes.

Vodafone had said the scheme had already been sanctioned by the high courts of Bombay, Calcutta, Madras and Delhi.

PTI