India demands $1.2B back taxes from CK Hutchison

India demands $1.2B back taxes from CK Hutchison

India’s tax authorities have issued a tax bill totalling INR79 billion ($1.23 billion) to CK Hutchison’s international telecoms unit.

The fee is for capital gains tax related to Vodafone’s 2007 acquisition of CK Hutchison’s Indian operations for 10.7 billion. The Hong Kong-headquartered firm acknowledged that it had received the bill, but maintained its position that the deal was not subject to taxes in India.

CK Hutchison’s argument is consistent with a 2012 decision by India’s Supreme Court. Following a dispute between the operators and the tax authorities over whether the deal was subject to taxation, the court ruled in favour of the operators.

However, in the five years since this decision was reached, India has brought in new guidelines around foreign investment which could lead to fees being applied retroactively to the Vodafone-Hutchison acquisition. After completing an ‘assessment order’ in January, India’s tax authorities in August demanded that CK Hutchison pay its INR79 billion tax bill relating to the deal, along with INR164.3 billion in interest.

Hutchison Telecommunications International has said that its legal advisors consider the bill to have been issued “on the basis of retrospective legislation seeking to overturn the judgment of the Supreme Court of India in January 2012, which ruled that the acquisition was not taxable in India”, and described the action as “in violation of the principles of international law.”

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