No tax dues in India, claims Vodafone CEO

British telecom multinational Vodafone on Thursday asserted it does not have any tax dues in India. The I-T department has demanded $2 billion from the company as capital gains tax on account of the Vodafone-Hutch deal. Vodafone chief executive Vittorio Colao said here: "We continue to be convinced and advised that no tax is due. We have made an acquisition in this country. We have not sold assets."

Colao's statement came just before the British chancellor of the exchequer George Osborne's meeting with finance minister Pranab Mukherjee.

The Vodafone tax matter was discussed at the meeting, say sources. Vodafone has mounted a legal challenge, arguing the income tax department doesn't have jurisdiction to tax the Vodafone-Hutch deal, which was structured as a transaction between two corporate entities outside India. Vodafone was based in Netherlands and Hutchison was incorporated in Cayman Islands.

The tax department had asked Vodafone to pay tax for its $11.2-billion acquisition of a controlling stake in one of India's largest cellphone companies in 2007. The tax department's contention is that Hutchison made capital gains in the deal, and while paying Hutchison for the stake, Vodafone should have deducted tax on it.

The court hearing of Vodafone's appeal is scheduled for August 2. The department issued a show-cause notice to Vodafone in 2007, which it challenged before the Bombay High Court. After the Court dismissed Vodafone's petition, it moved Supreme Court in January 2009.

SC sent the case back to I-T department, to decide first whether the latter had the jurisdiction, given the fact that both Vodafone and Hutchison are based abroad.

Colao said he was confident of India's judicial process resulting in a favourable outcome for the company. There could be some movement in the case with some pressure from the UK government in favour of Vodafone. UK's business secretary Vince Cable had said that Osborne will bring up the Vodafone tax issue before the India's finance minister. He added that India needs to send a message to UK investors clarifying tax matters.