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Vodafone not liable to pay capital gains tax: Sarin
September, 22nd 2007
Deal with Hutchison Telecom

Vodafone Essar is keen to apply for more spectrum

Sarinspeak: Mr Arun Sarin, Vice-Chairman, Vodafone-Essar, Mr Asim Ghosh, CEO, and Mr Ravi Ruia, Chairman, after a board meeting of the company in Mumbai on Friday.

Mr Arun Sarin, Vice-Chairman, Vodafone Essar, said on Friday that the company is not liable to pay capital gain tax on the deal it had sewn with Hutchison Telecom International Ltd (HTIL) for the 67 per cent stake in the erstwhile Hutchison Essar.

According to media reports, Indian tax authorities had made a $2 billion tax claims on the company.

We are working with the Income-Tax Department to sort this issue. Neither the Essar Group, nor Vodafone, nor Vodafone Essar is liable to pay taxes. It is the seller who should be taxed; and the seller is not one of the parties represented here, Mr Sarin told presspersons after the second board meeting of the recently rechristened Vodafone Essar here today.

The meeting was also attended by Mr Ravi Ruia, Chairman, Vodafone Essar and Mr Asim Ghosh, CEO, Vodafone Essar.

In May, Vodafone Group Plc had paid $10.9 billion to HTIL for acquiring 67 per cent controlling stake in Hutchison Essar, which has now been rechristened as Vodafone Essar.

The tax department is reported to have stated that Vodafone Essar should have paid $2 billion as capital gains tax by deducting the amount from the $10.9 billion paid to HTIL, on the grounds that it was an agent of Vodafone.

The countrys third largest mobile operator then filed a writ petition in the Bombay High Court challenging the IT Departments decision to levy the tax on the deal. The first hearing of the petition is expected to come up on September 27.

Mr Sarin, who is also the CEO of Vodafone Group Plc, added that Vodafone Essar is keen to apply for more spectrum and is currently taking up the matter with the Essar Group (which holds a 33 per cent stake in the company) and other agencies.

The company had recently unveiled its re-branding exercise, making India the 26th country where Vodafone has operations.

On being queried about a possible IPO, Mr Sarin categorically ruled out the possibility stating that the company was sitting on enough capital resources.

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