Hutch gets ` 32,000cr notice

After 10 yrs of battle with Vodafone, Hutchison asked to cough up money

New Delhi, Aug 29: The income-tax department has slapped a `32,320 crore demand in tax, interest and penalty on Hong Kong-based Hutchison for alleged capital gains it made on the $11 billion sale of its mobile business in India to UK’s Vodafone Group in 2007.

In a filing to the Hong Kong stock exchange, billionaire Li Ka-shing’s CK Hutchison Holdings Ltd said that its unit Hutchison Telecommunications International Ltd (HTIL) has been served with a tax demand of about `7,900 crore, `16,430 crore of interest and another `7,900 crore in penalty.

The CK Hutchison unit, however, continues to dispute the validity of those taxes, the company said in the filing said.

This is the first time that a tax demand has been raised on the Hong Kong firm. So far, the Indian government had been pursuing the tax from Vodafone.

Vodafone was initially slapped with `7,990-crore tax demand for not withholding tax from payments that it made to Hutchison. The outstanding after including interest and penalty runs over `20,000 crore.

Vodafone 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.

Thereafter, the government in May 2012 amended the tax laws with retrospective effect and claimed taxes. Vodafone has disputed such levy and the matter is before an international arbitration panel.

Besides Vodafone, the retrospective legislation was used to levy a principal tax liability of `10,247 crore on another British company, Cairn Energy Plc. That matter too is before an international arbitration panel.

HTIL, an indirect wholly owned subsidiary of CK Hutchison Holdings Ltd, received from the tax department a draft assessment order dated November 24, 2016, alleging gains made on sale of its entire 67 per cent in the India business to Vodafone.

“HTIL received on Febr-uary 13, 2017 from the income-tax department an assessment order dated January 25, 2017 in respect of tax of approximately `7,900 crore on capital gains” in connection with the 2007 deal plus aggregate interest of approximately `16,430 crore,” the filing said.

“HTIL received on August 9, 2017 from incometax authorities a penalty order dated July 3, 2017 for a penalty of approximately `7,900 crore”, it added.

CK Hutchison, however, said that the taxes cannot be validly imposed on HTIL. It added that the order issued by the income-tax department 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”.

“Accordingly, the company continues to believe that the orders would not have any effect on the company’s financial condition or the results of its operations for any period,” it said without saying what course of action would it take.

Vodafone had in 2007 acquired 67 per cent stake in the mobilephone business owned by Hutchison Whampoa, now part of CK Hutchison. — PTI