January 28th is D-Day for both Vodafone and the Income Tax Department - when the Bombay High Court could rule whether Vodafone should be taxed USD 2 billion on the deal that it struck to buy Hutch. But Chairman of the Central Board of Direct Taxes or the CBDT is stepping up the pressure. CNBC-TV18s Arun Giri and Harsha Subramaniam have this exclusive report.
With just a few days before the Bombay High Court hearing in the high profile USD 2 billion Vodafone tax case, the tax department has come out all guns blazing. The CBDT accepts that Hutch did not sell the stake in the Indian company directly to Vodafone.
But the Department says even though shares of a Cayman Island Company were sold, it resulted in change in ownership of the Indian company - Hutchison Essar.
R Prasad, Chairman, CBDT, said, "Interest in the company has changed, though share transaction may have happened outside."
The stakes are high for the Tax Department. A favourable order would allow the department to open many more such cases. The department has already sent notice to Genpact and also Tata Industries for the AT&T deal. These deals were quite similar to the Hutch - Vodafone transaction.
And the CBDT Chairman admits that the High court order could set a landmark precedent in dozens of similar cases.
R Prasad said, International tax is a grey area - both for the department and the consultants."
The action shifts to the courtroom next week where a division bench will decide on the largest ever, corporate tax litigation.