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New Delhi, August 29: The Income Tax Department has slapped a Rs32,320 crore demand in tax, interest and penalty on Hong Kong-based Hutchison for alleged capital gains it made on the $11 billion sale of its mobile business in India to UK’s Vodafone Group in 2007.
In a filing to the Hong Kong stock exchange, billionaire Li Ka-shing’s CK Hutchison Holdings Ltd said its unit, Hutchison Telecommunications International Ltd (HTIL) has been served with a tax demand of about Rs7,900 crore, Rs16,430 crore of interest and another Rs7,900 crore in penalties.
At the current exchange rate, $11 billion works out to more than Rs70,400 crore. The CK Hutchison unit continues to dispute the validity of those taxes, it said.
This is the first time a tax demand on the Hong Kong firm is being raised. So far, the Indian government had been pursuing the tax from Vodafone.
Vodafone was initially slapped with Rs7,990 crore tax demand for not withholding tax from payments it made to Hutchison. The outstanding after including interest and penalty runs over Rs20,000 crore.
It challenged the levy and the Supreme Court in January 2012 ruled that the company was not liable to pay any tax over the acquisition of assets in India from Hutchison.
Thereafter, the government in May 2012 amended the tax laws with retrospective effect and claimed taxes. Vodafone has disputed such levy and the matter is before an international arbitration panel.
Besides Vodafone, the retrospective legislation was used to levy a principal tax liability of Rs10,247 crore on another British company, Cairn Energy Plc. That matter too is before an international arbitration panel.
HTIL, an indirect wholly owned subsidiary of CK Hutchison Holdings Ltd, received from the tax department a draft assessment order dated November 24, 2016 alleging gains made on sale of its entire 67 per cent in the India business to Vodafone.
