Vodafone need not pay tax for Hutchison deal: SC

The Supreme Court on Friday set aside the Bombay High Court order directing Vodafone to pay a tax of Rs 11,218 crore ($2.5 billion) for acquiring the operations of Hutch Essar in 2007.

Delivering a majority judgment, Chief Justice S.H. Kapadia said Indian tax authorities have no jurisdiction over the transactions carried out abroad. He said for the stability of economic operations, investors should know where they stand.

Kapadia also said Hutch Essar, whose Indian operations were acquired by Vodafone, was not a fly-by-night operator and was in India since 1994 and had contributed Rs 20,242 crore by way of direct and indirect taxes.

Justice Kapadia delivered the majority judgment alone with Justice Swatanter Kumar. However, in a concurrent judgment but with different reasoning, Justice K.S. Radhakrishnan also set aside the high court judgment of 2010.

The court said the tax authorities will return the Rs 2,500 crore that Vodafone had deposited in pursuance to its interim order within two months from Friday.

It also said tax authorities will pay interest at the rate of 4 per cent per annum from the date the tax authorities withdrew money from the court's registry and up to the date when they actually return the money.