The $2billion Vodafone tax saga, which has gripped the attention of the entire tax world for the last 5 years ( and even chambers of businesses across the world over the last month or so ) may finally be close to an “amicable settlement.” Last evening ( May 1^st), Vodafone CEO Vittorio Colao  met Finance Minister Pranab Mukherjee in the presence of senior Finance Ministry and CBDT officials and is learnt to have reiterated the company’s stand against the retrospective amendments to bring Vodafone into the tax net.

A senior Finance Ministry Official told Taxsutra on the condition of anonymity that while the Government is favourably pre-disposed towards waiving off the penalty of  Rs. 7,900 odd crores, it is waiver of the interest amount ( over Rs. 3,000cr ) that is causing them headache. Arun Giri, Editor, Taxsutra.com (with inputs from Ameya Kunte), analyses the options on the table before Finance Ministry which could be positioned as a  'Win Win' for both the Government and Vodafone.

The Union Budget, announced on March 16, 2012 has dampened Vodafone's jubilation after its victory in the Supreme Court. Finance Bill 2012 proposes to introduce retrospective amendments to Sec 9, clarifying that indirect transfers were always within its ambit. It also proposes to introduce a Validation Clause that will enable the tax authorities to issue a fresh demand notice to Vodafone, notwithstanding the SC ruling. If the Finance Bill becomes an Act with these provisions retained as they are, it seems that Vodafone will be back to square one! 

Vodafone approaches Bombay HC against Rs 8,500 cr transfer pricing adjustment ; Likely to rely on SC’s observations that option rights were not ‘transferred’ by Hutch to Vodafone 

As reported by Taxsutra first, the Government has filed a Review Petition against the Supreme Court ruling in  Vodafone tax case, terming the judgment as one that “suffers” from  many errors apparent on record and which  failed to consider the case submitted by the Revenue.  The 100 page Review Petition criticizes  the judgment on multiple counts, especially the Supreme Court’s emphasis on the FDI aspect, the court’s views on Ramsay doctrine & Azadi Bachao vs McDowell, its interpretation of Sec. 9, reliance on a Direct Taxes Code provision which has not been enacted and which the Government argues is only an “exemption” provision and not meant to charge off-shore transfers and the Court’s remarks about the taxes paid by Vodafone Essar in India 

The few days, immediately after the landmark Vodafone judgment was pronounced, saw in-depth discussion and analysis of the ruling. We bring to you, a summary of the proceedings of 5 Webinars conducted by leading experts, who explained and analyzed the implications of the judgment. Few of the key aspects discussed in these Webinars were; whether the Revenue is likely to file a review petition, whether Justice Radhakrishnan's concurring judgment is of binding nature and whether a retrospective amendment to Section 9 is possible.

In a thundering judgment dismissing the Income Tax Department’s jurisdiction over the $18bn deal and virtually reaffirming almost each and every argument advanced by Vodafone counsel Harish Salve, Chief Justice Kapadia has unequivocally called the Hutch – Vodafone deal as one composite transaction and the CGP led structure of Hutchison Telecom as single consolidated bargain.  Hence the Income Tax Department did not have any right to levy tax on the ‘ offshore share sale’ of CGP by Hutchison to Vodafone…. 

One can narrow down the possibilities surrounding the SC ruling into 3 most likely scenarios - An Outright Vodafone win (which means IT Department has no jurisdiction to proceed further in this matter), An Outright IT Department victory (meaning over $2bn in revenues) or the famous A+B theory propounded by Bombay HC (the Cayman share sale is an offshore transaction but there are other valuable rights in India which have been transferred by Hutch to Vodafone and therefore IT Department has jurisdiction). So here are the 10 things to watch out for in the SC judgment, which is likely to be lengthy, comprehensive and where each word will be put under the microscope!

The Chief Justice ( Mr. SH Kapadia ) and his colleagues on the bench Justice Radhakrishnan and Justice Swatanter Kumar know that whichever way they rule, their judgement is likely to go down in the pages of history as an all time classic. As the judges ponder 'form vs substance', 'situs vs control' and 'Azadi vs McDowell', we bring you the blow by blow account of the dramatic, 26 days marathon proceedings in SC.

Both Salve and Nariman are armed with a litany of case laws to bolster their respective claims, but in the end it is likely to boil down to the 2 SC rulings on which Vodafone and IT Department have pinned their hopes - Azadi Bachao Andolan and McDowell. Will the apex court finally settle the age old ' tax planning vs tax avoidance' debate? Taxsutra.com analyses the key Indian and foreign case laws being relied upon by both parties.

A division bench of Justice Dr Chandrachud and Justice Devdhar passed a landmark, 196 pages ruling in tax department's favour,  decisively holding that " The income accrued and arose and was derived as a consequence of the divestment of HTIL’s interest in India. " However it still led to quite a bit of confusion and is now famously referred to as 'A+B ' theory.