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Drags Income - Tax dept. to court
May, 01st 2009

Aditya Birla Nuvo has moved the Bombay High Court against the income tax department for sending it a notice that treats the company as an agent of the US telecom major AT&T. AT&T had sold about 16% stake in Idea Cellular to Aditya Birla Nuvo for about $150 million. The writ petition filed by the company is likely to come up for hearing next week.

AT&T did not pay tax on this transaction on grounds that the deal was routed through a company based in Mauritius with which India has signed a double tax avoidance treaty. Since AT&T had not paid capital gains tax on this transaction, by naming Aditya Birla Nuvo as an agent of AT&T, I-T has effectively shifted tax liability of the transaction to the latter.

The tax notice was issued to the company despite the fact it had secured a no objection certificate (NOC) from the income-tax department before making the payment to AT&T, the US.

I-T department had earlier sent a notice to Cingular, which had acquired AT&T . Experts on cross-border taxation viewed the notice to Cingular as a preliminary to bringing Aditya Birla Nuvo in the tax net.

The Aditya Birla Groups main contention against the department centres around NOC issued by the department and the latter going back on its word. However, according to the tax department, the NOC given to Aditya Birla Nuvo was at best provisional. An I-T source told ET that a provisional permission would not deter it from sending notices. The I-T departments view is that since it is not planning to raise tax from both the parties, they should decide among themselves, as to who would pay the tax.

Tata Industries, which had sold its shares to the Birla Group in 2006, was also sent a demand notice, following which it paid Rs 45 crore.

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